Which are expected long-run profit for the best alternative

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Reference no: EM131930017

Q. The operations manager for a well-drilling company must recommend whether to build a new facility, expand this existing one, or do nothing. He estimates that long-run profit (in thousands of dollars) will vary with the amount of precipitation (rainfall) as follows.

Alternative	Precipitation
Alternative	Low	Normal	High
Do nothing	-100	100	300
Expand	350	500	200
Build new	750	300	0

1. If he uses the maximax criterion, which alternative is the best?

2. If he uses the Laplace criterion, which alternative is the best?

3. If he uses the minimax regret criterion, which alternative is the best?

4. If he feels the chances of low, normal, and high precipitation are, 0.3, 0.2, and 0.5, respectively, which are expected long-run profit for the best alternative?

Reference no: EM131930017

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