3) A local real estate investor in Orlando is considering three alternative investments: a motel, a theater, or a restaurant.

The motel and restaurant will be adversely or favorably affected by the availability of gasoline and the number of tourists,

while the theater will be relatively stable under any conditions.

The following payoff table shows the profit ( or losses) resulting from each investment.

  

Determine the best investment using the following decision criteria:

a) Maximax

 

b) Maximin

 

c) Minimax regret

 

d)Hurwicz (0.4

 

e). Equal Likelihood

Determine the best weather

  
    

and the expected value of perfect information.

 
    
 

Weather Condition

 

Decision

Rain

Overcast

Sunshine

Probabilities

30%

15%

55%

Sun Visitors

($500)

($200)

$1,500

Umbrellas

$2,000

$0

($900)

 

 

 

 

Ideal

$2,000

$0

$1,500

 

Determine the project to invest

  
    

and the expected value of perfect information.

 
    
 

Interest Rate

  

Decision

Decline

Stable

Increase

Probabilities

50%

40%

10%

Office park

 $          0.50

 $          1.70

 $          4.50

Office building

 $          1.50

 $          1.90

 $          2.50

Warehouse

 $          1.70

 $          1.40

 $          1.00

Mall

 $          0.70

 $          2.40

 $          3.60

Conominiums

 $          3.20

 $          1.50

 $          0.60

Ideal

 $          1.70

 $          1.90

 $          4.50

Determine the best decision using the following decision criteria.

a) Maximax

 

b) Maximin

 

c) Equal likelihood

 

d) Hurwicz (0.5)

 
  
  
 

Economic Conditions

Degree Program

Recession

Graphic Design

$145,000

Nursing

$150,000

Real Estate

$115,000

Medical technology

$130,000

Culinary Technology

 $ 115,000.00

Computer technology

 

Ideal

$150,000

  • 6 years ago