# Using the Payoff table below, choose the optimum Production Process by calculating the Maximin

Using the Payoff table below, choose the optimum Production Process by calculating the Maximin..

answer:

(i) Using the maximin criterion( choosing the best of the worst level of demands)

From the table process Y with $89,000 is best among the three in the low demand.so the answer is process Y.

(ii)By using criterion of realism,

Given: coefficiet of realism=60%=0.6

1-(coefficiet of realism)=0.4

now calculating for each process ,( coefficient of realism)*(maximum demand) + (1-coefficient of realism)*(minimum demand)

for process X= 0.6*180,000 + 0.4*86,000=$142,400

for process Y= 0.6*170,000 + 0.4*89,000=$137,600

for process Z= 0.6*210,000 + 0.4*80,000=$158,000

So the process Z is chosen.

(iii) Minimax regret criterion,

production process | low demand | Moderate demand | High demand |

X | 3000 | 25000 | 30000 |

Y | 0 | 20000 | 40000 |

Z | 9000 | 0 | 0 |

So now we have to calculate the averages for all the three processes,

for X=3000+25000+30000/3=$19,333.33

for Y=0+20000+40000/3=$20,000

for Z=9000+0+0/3=$3,000

So choosing the minimum that is process Z