Question

Using the below table, Fill in the regret table
Success Moderate Success Failure
Sell Company 150 150 150
Form Joint Venture 500 598.00 82.00
Sell Software on own 610.00 400 -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?
a) Sell company
b) Form Joint Venture
c) Sell software on own

Answer 1

First find the best payoff in each state (column):
- Success: max = 610
- Moderate Success: max = 598
- Failure: max = 150

Regret = (column max) − (option payoff). Regret table:

Regret Table
- Sell Company: Success 460, Moderate Success 448, Failure 0 (max regret = 460)
- Form Joint Venture: Success 110, Moderate Success 0, Failure 68 (max regret = 110)
- Sell Software on own: Success 0, Moderate Success 198, Failure 650 (max regret = 650)

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