Question

Using the below table, Fill in the regret table
Success Moderate Success Failure
Sell Company 150 150 150
Form Joint Venture 500 545.00 88.00
Sell Software on own 789.00 400 -500

Regret Table Success Moderate Success Failure
Sell Company
Form Joint Venture
Sell Software on own

Based on the MiniMax Regret Method, which decision alternative will you choose?

Answer 1

First find the column maxima (best payoff in each state):
- Success: max(150, 500, 789) = 789
- Moderate Success: max(150, 545, 400) = 545
- Failure: max(150, 88, -500) = 150

Regret = (column max) − (payoff). The filled regret table:

Regret Table
- Sell Company: Success 789−150 = 639; Moderate Success 545−150 = 395; Failure 150−150 = 0
- Form Joint Venture: Success 789−500 = 289; Moderate Success 545−545 = 0; Failure 150−88 = 62
- Sell Software on own: Success 789−789 = 0; Moderate Success 545−400 = 145; Failure 150−(−500) = 650

So the regret table is:
- Sell Company: 639, 395, 0
- Form Joint Venture: 289, 0, 62
- Sell Software on own: 0, 145, 650

Max regrets by alternative:
- Sell Company: 639
- Form Joint Venture: 289
- Sell Software on own: 650

By the MiniMax Regret rule (choose the alternative with the smallest maximum regret), choose: Form Joint Venture.