Question

Sell Company 150 150 150
Form Joint Venture 500 518.00 52.00
Sell Software on own 664.00 400 -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 Form Joint Venture

Answer 1

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:

\[
\begin{array}{|c|c|c|c|}
\hline
\text{Decision Alternative} & \text{Success} & \text{Moderate Success} & \text{Failure} \\
\hline
\text{Sell Company} & 664 - 150 = 514 & 518 - 150 = 368 & 150 - 150 = 0 \\
\hline
\text{Form Joint Venture} & 664 - 500 = 164 & 518 - 518 = 0 & 150 - 52 = 98 \\
\hline
\text{Sell Software on own} & 664 - 664 = 0 & 518 - 400 = 118 & 150 - (-500) = 650 \\
\hline
\end{array}
\]

- **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.