# 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..

(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

Asked on May 20, 2017 in