Develop an opportunity loss table-minimax regret decision
Even though independent gasoline stations have been having a difficult time,
Susan Solomon has been thinking about starting her own independent gasoline
station. Susan’s problem is to decide how large her station should be. The
annual returns will depend on both the size of her station and a number of
marketing factors related to the oil industry and demand for gasoline. After a
careful analysis, Susan developed the following table:
Size of market Profit in Good Market Profit in Fair Market Profit in Poor
Market
Small 50,000 20,000 -10,000
Medium 80,000 30,000 -20,000
Large 100,000 30,000 -40,000
Very Large 300,000 25,000 -160,000
For example, if Susan constructs a small station and the market is good, she
will realize a profit of $50,000.
a) Develop a decision table for this problem that includes the option of not
opening a station.
b) What is the maximax decision?
c) What is the maximin decision?
d) What is the equally likely decision?
