A family business is considering making an investment in its manufacturing are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation. Decision Large Investment Small Investment Increasing Demand Stable Demand $1,000,000 Medium Investment 500,000 250,000 States of Nature O make the small investment O make the medium investment O make the large investment choose increasing demand $400,000 300,000 125,000 Decreasing Demand -$600,000 -200,000 The best decision for the business using the equal likelihood criterion would be to 25,000

A family business is considering making an investment in its manufacturing are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation. Decision Large Investment Small Investment Increasing Demand Stable Demand $1,000,000 Medium Investment 500,000 250,000 States of Nature O make the small investment O make the medium investment O make the large investment choose increasing demand $400,000 300,000 125,000 Decreasing Demand -$600,000 -200,000 The best decision for the business using the equal likelihood criterion would be to 25,000

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.2: Elements Of Decision Analysis

Problem 2P

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