A Firm Is Considering Three Business Projects

Essay

A firm is considering three business projects. Project A will return a loss of $5 if conditions are poor, a profit of $4 if conditions are good, and a profit of $8 if conditions are excellent. Project B will return a profit of zero if conditions are poor, a profit of $2 if conditions are good, and a profit of $7 if conditions are excellent. Project C will return a profit of $1 if conditions are poor, $3 if conditions are good, and $5 if conditions are excellent.
(i)Use the maximin criterion to determine the preferred project. Show how you arrived at your solution.
(ii)Calculate the regret matrix.
(iii)Use the minimax regret criterion to determine the preferred project. Show how you arrived at your solution.