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B.F. Retread, a tire manufacturer, wants to select one of three feasible prototype designs for a new tire; A, B, C. Revenues Low (0.30) Medium (0.50) High (0.20) A 120,000 255,000 390,000 B 130,000 295,000 460,000 C 100,000 300,000 480,000 What is the best decision using the maxi-min approach to decision making

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anthougo

Answer:

B.F. Retread

The best decision using the maximin approach to decision making is:

B.

Explanation:

a) Data and Calculations:

Revenues  Low (0.30) Medium (0.50) High (0.20)   Total Value

A              120,000 (0.30) + 255,000 (0.50) + 390,000 (0.20) =  $241,500

B              130,000 (0.30) + 295,000 (0.50) + 460,000 (0.20) = $278,500

C              100,000 (0.30) + 300,000 (0.50) + 480,000 (0.20) = $276,000

b) Using the maximin approach to decision making, the prototype design that fits the new tire is option B.  The B strategy yields the best of the worst outcomes from the three options, with a weighted revenue of $278,500.  This is far better than option A and C, which yield $241,500 and $276,000, respectively.

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