Reference no: EM132612164

Consider the following problem and answer question based on information given bellow.

Problem: The management of XYZ company is considering the use of newly discovered chemical which, when added to detergents, well make the washing stet, thus eliminating the necessary of adding softeners. The management is considering these three alternatives strategies.

S1=Add the new chemical to the currently marketed detergent DETER and sell it under label ''NEW IMPROVED DETER'

S2 = Introduce a brand new detergent under the name of 'SUPER SOFT '

S3 = Develop a new product and enter the softener market under the name 'EXTERA WH.''

The management has decided for the time Bing that only one of the three strategies is economically feasible under given market condition. The marketing research department is requested to develop a conditional pay off matrix for this problem. After conducting sufficient research, based on personal interviews and anticipating the possible reaction of the competition, the marketing research department submits the payoff matrix given below.

Alternative strategies              States of nature

                        S1          S2                   S3

A1                     47      49                33

A2                      32        25            41

A3                      51       30            14

Question 1: What is the optimal strategy if you apply the criterion of pessimism? Consider the payoffs table is in both profit and cost.

Question 2:  What is optimal strategy if you apply the criterion of optimism? Consider the payoffs table is in both profit and cost?

Question 3: What is the optimal strategy if you apply Laplace criterion?

Question 4: What is the optimal strategy if you apply minimax regret criterion?