Roger Davis wants to open an independent gasoline station. Roger must decide how large his station should be. The annual returns will depend upon both the size of his station and the demand for gasoline. After careful analysis, Roger developed the subsequent table.

Size of Station             Good Market                Fair Market                  Poor Market

$ (000)                                    $ (000)                        $ (000)                        $ (000)

Small                                        50                              20                                -10

Medium                                    80                              30                                -20

Large                                       100                              30                                -40

Very Large                              300                              25                                -160

a. Develop a decision table for this decision.

b. What is the Maximax decision?

c. What is the Maximin decision?

d. What is the Mini-max Regret decision?

e. Prepare a decision tree of this problem.

f. If the probabilities of the markets are good market, 30%; fair market, 50%; poor market, 20%, calculate the expected values and expected opportunities lost of each option, and make a recommendation.