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A fitness center is considering an expansion. Three proposals are being considered: add new pool, add new equipment or add child center. The profits for three different customer responses for each proposal are shown in the table below:

                                                        Customer Response

                                           High               Moderate              Low

Add New Pool                 100,000               60,000                50,000

Add New Equipment       120,000              80,000                30,000

Add Child Center             120,000               70,000                60,000

For this problem:

(a) What is the optimal decision when using the maximax criterion? What is the payoff for it?

(b) What is the optimal decision when using the maximin criterion? What is the payoff for it?

(c) What is the optimal decision when using the minimax regret criterion? What is the payoff for it?

(d) What is the optimal decision using the Hurwicz’s criterion if α = 0.4? What is the payoff for it?

Operation Management, Management Studies

  • Category:- Operation Management
  • Reference No.:- M92184861

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