To use the MiniMax Regret Method, we first need to calculate the regret for each decision alternative across the different states of nature (Success, Moderate Success, Failure).
-
Identifying the maximum payoffs for each outcome:
- Success: The maximum payoff is 677 (from "Sell Software on own").
- Moderate Success: The maximum payoff is 500 (from "Form Joint Venture").
- Failure: The maximum payoff is 150 (from all alternatives).
-
Calculating the regret for each alternative:
- Regret is calculated as the difference between the maximum payoff for each outcome and the payoff of that specific alternative.
| Decision Alternative | Success | Moderate Success | Failure | |-------------------------|---------|------------------|--------| | Sell Company | 150 | 150 | 150 | | Form Joint Venture | 500 | 461 | 109 | | Sell Software on own | 677 | 400 | -500 |
-
Regret for each alternative:
-
Sell Company:
- Success: 677 - 150 = 527
- Moderate Success: 500 - 150 = 350
- Failure: 150 - 150 = 0
- Maximum Regret: max(527, 350, 0) = 527
-
Form Joint Venture:
- Success: 677 - 500 = 177
- Moderate Success: 500 - 461 = 39
- Failure: 150 - 109 = 41
- Maximum Regret: max(177, 39, 41) = 177
-
Sell Software on Own:
- Success: 677 - 677 = 0
- Moderate Success: 500 - 400 = 100
- Failure: 150 - (-500) = 650
- Maximum Regret: max(0, 100, 650) = 650
-
-
Identifying the alternative with the minimum maximum regret:
- Sell Company: 527
- Form Joint Venture: 177
- Sell Software on own: 650
-
Conclusion: The maximum regret for the alternative "Sell Software on own" is 650. Thus, based on the MiniMax Regret Method, the value for the decision alternative "Sell Software on Own" is 650.