Using the information in the payoff table, develop a table of regrets, and then

a. Determine the alternative that would be chosen under minimax regret.

b.Determine the expected value of perfect information using the regret table, assuming that the probability of anew bridge built is.60.

New Bridge Built No New Bridge

Alternative capacity A 1 14

for new store B 2 10

C 4 6

where A= small, B = medium, and C= large

Question

Using the information in the payoff table, develop a table of regrets, and then

a. Determine the alternative that would be chosen under minimax regret.

b.Determine the expected value of perfect information using the regret table, assuming that the probability of anew bridge built is.60.

		New Bridge Built	No New Bridge
Alternative capacity	A	1	14
for new store	B	2	10
	C	4	6

where A= small, B = medium, and C= large

Accepted Answer

To obtain the regrets, subtract all payoffs in each column from the best payoff in the column . The regrets are

	New Bridge	No New Bridge
A	3	0
B	2	4
C	0	8

a. Minmax regret involves finding the worst regret for each alternative and then chosing the choosing the alternative that has the "best" worst. Thus, you wold choose A:

	worst
A	3[best]
B	4
C	8

regret Since the probability of a new bridge is given as 60 , we can deduce that the probability of no new bridge is 1.00 - 60 =40 The expected regected are

A: .60(3) + .40(0) =1.80

B: .60(2) + .40(4) =2.80

C : .60(0) + .40(8) =3.20

Hence, the EVPI is 1,80.

Question 5.S.3: Using the information in the payoff table, develop a table o...

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