Decision Analysis 2 Questions

Has to be completed in Excel:

Problem 8: Decision problem, Probability, forecast

A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists: profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment:

                                                                                Gasoline Availability

Investment           Shortage                          Stable Supply                  Surplus

Motel                      $ - 8,000                         $15,000                           $20,000

Restaurant                    2,000                             8,000                               6,000

Theater                        6,000                              6,000                                5,000

Determine the best investment, using the following decision criteria.

a.     Maximax

b.    Maximin

c.     Minimax regret

d.    Hurwicz (a = .4)

e.     Equal likelihood