Question

Success Moderate Success Failure
Sell Company 150 150 150
Form Joint Venture 500 461.00 109.00
Sell Software on own 677.00 400 -500
Based on the MiniMax Regret Method, what is the value for the Decision Alternative Sell software on own

Answer 1

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).

1. **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).

2. **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

3. **Identifying the alternative with the minimum maximum regret:**
- Sell Company: 527
- Form Joint Venture: 177
- Sell Software on own: 650

4. **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.