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Management at Washington Hospital Center is thinking about two investments. One is an MRI machine, which can make $ 100,000 in good economic conditions or $ 60,000 in bad economic conditions. Another is a CT scanner, which can make $ 150,000 in good economic conditions or $ 10,000 in bad economic conditions. Thus the decision depends on the economic conditions. What is the probability of good economic conditions that equates the two investments?
a. Develop a payoff table for this situation.
b. Find the following:
1. Maximax
2. Maximin
3. Equal likelihood
4. Minimax regret
c. Create a sensitivity graph comparing the different alternatives as the probability of economic conditions changes.
Book:
Kros, John F.; Brown, Evelyn C. (2012-12-12). Health Care Operations and Supply Chain Management: Operations, Planning, and Control (pp. 194-195). Wiley.
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