To apply the MiniMax Regret Method, you first need to calculate the regret for each decision under each state of nature. Regret is calculated as the difference between the best payoff for each state of nature and the payoff of the decision alternative under that state of nature.
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Identify the best outcome for each state of nature (Success, Moderate Success, Failure):
- For Success: The best payoff is from "Sell Software on own," which yields 677.00.
- For Moderate Success: The best payoff is from "Form Joint Venture," yielding 461.00.
- For Failure: The best payoff is from "Sell Company," yielding 150.00.
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Calculate the regret for each decision alternative based on the determined best outcomes:
| Decision Alternative | Success Regret | Moderate Success Regret | Failure Regret | |------------------------------|-------------------------|---------------------------|-----------------------------| | Sell Company | 677 - 150 = 527 | 461 - 150 = 311 | 150 - 150 = 0 | | Form Joint Venture | 677 - 500 = 177 | 461 - 461 = 0 | 150 - 500 = 350 | | Sell Software on own | 677 - 677 = 0 | 461 - 400 = 61 | 150 - (-500) = 650 |
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Identify the maximum regret for each alternative:
- Sell Company: Max Regret = 527
- Form Joint Venture: Max Regret = 350
- Sell Software on own: Max Regret = 650
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Select the alternative with the minimum of these maximum regrets.
The maximum regret for "Sell Software on own" is 650.
Thus, the value for the Decision Alternative "Sell Software on own" in terms of Max Regret is 650.