Using the below table, Fill in the regret table

Success Moderate Success Failure
Sell Company 150 150 150
Form Joint Venture 500 460.00 75.00
Sell Software on own 618.00 400 -500

Regret Table Success Moderate Success Failure
Sell Company
Form Joint Venture
Sell Software on own

Based on the MiniMax Regret Method, what is the value for the Decision Alternative Sell company

1 answer

To fill in the regret table, we first need to determine the optimum payoff for each state of nature (Success, Moderate Success, and Failure) for all decision alternatives. Then, we will calculate the regret, which is the difference between the best payoff for that state of nature and the payoff from the decision alternative.

Step 1: Identify the maximum payoffs for each state of nature.

  • Success:

    • Sell Company: 150
    • Form Joint Venture: 500
    • Sell Software on own: 618
    • Maximum: 618 (Sell Software on own)
  • Moderate Success:

    • Sell Company: 150
    • Form Joint Venture: 460
    • Sell Software on own: 400
    • Maximum: 460 (Form Joint Venture)
  • Failure:

    • Sell Company: 150
    • Form Joint Venture: 75
    • Sell Software on own: -500
    • Maximum: 150 (Sell Company)

Step 2: Calculate the regret for each decision alternative.

Regret = Maximum Payoff - Payoff from Decision Alternative

  1. For Success:

    • Sell Company: 618 - 150 = 468
    • Form Joint Venture: 618 - 500 = 118
    • Sell Software on own: 618 - 618 = 0
  2. For Moderate Success:

    • Sell Company: 460 - 150 = 310
    • Form Joint Venture: 460 - 460 = 0
    • Sell Software on own: 460 - 400 = 60
  3. For Failure:

    • Sell Company: 150 - 150 = 0
    • Form Joint Venture: 150 - 75 = 75
    • Sell Software on own: 150 - (-500) = 650

Step 3: Fill in the regret table.

| | Success | Moderate Success | Failure | |------------------------|---------|------------------|--------| | Sell Company | 468 | 310 | 0 | | Form Joint Venture | 118 | 0 | 75 | | Sell Software on own | 0 | 60 | 650 |

Step 4: Apply the MiniMax Regret Method

According to the MiniMax Regret Method, we determine the maximum regret for each decision alternative and then select the one with the minimum of these maximum regrets.

  • Sell Company: Maximum Regret = 468
  • Form Joint Venture: Maximum Regret = 118
  • Sell Software on own: Maximum Regret = 650

Conclusion

The decision alternative with the lowest maximum regret is "Form Joint Venture" with a maximum regret of 118.

Thus, for the decision alternative "Sell Company", the maximum regret is 468.