To apply the MiniMax Regret Method, we first need to identify the maximum payoff for each outcome (Success, Moderate Success, Failure) across all decision alternatives. Then we calculate the regrets for each outcome based on these maximum values.
Given the payoffs:
- Sell Company: 150, 150, 150
- Form Joint Venture: 500, 518, 52
- Sell Software on own: 664, 400, -500
Step 1: Identify the maximum payoffs for each outcome.
- Success: Max(150, 500, 664) = 664
- Moderate Success: Max(150, 518, 400) = 518
- Failure: Max(150, 52, -500) = 150
Step 2: Calculate the regret for each decision alternative.
Regret is calculated as the difference between the maximum payoff for each outcome and the payoff of the decision alternative.
Regret Table:
\[ \begin{array}{|c|c|c|c|} \hline \text{Decision Alternative} & \text{Success} & \text{Moderate Success} & \text{Failure} \ \hline \text{Sell Company} & 664 - 150 = 514 & 518 - 150 = 368 & 150 - 150 = 0 \ \hline \text{Form Joint Venture} & 664 - 500 = 164 & 518 - 518 = 0 & 150 - 52 = 98 \ \hline \text{Sell Software on own} & 664 - 664 = 0 & 518 - 400 = 118 & 150 - (-500) = 650 \ \hline \end{array} \]
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Sell Company:
- Success: 514
- Moderate Success: 368
- Failure: 0
-
Form Joint Venture:
- Success: 164
- Moderate Success: 0
- Failure: 98
-
Sell Software on own:
- Success: 0
- Moderate Success: 118
- Failure: 650
Step 3: Identify the maximum regret for each alternative.
- Sell Company: Max Regret = 514
- Form Joint Venture: Max Regret = 164
- Sell Software on own: Max Regret = 650
Step 4: Choose the alternative with the minimum of the maximum regrets.
In this case:
- Sell Company: 514
- Form Joint Venture: 164 (the minimum)
- Sell Software on own: 650
Thus, the value for the Decision Alternative Form Joint Venture using the MiniMax Regret Method is 164. This is the maximum regret associated with this decision alternative.