Figure 12-3
The Lee Company must choose between two mutually exclusive alternatives. With alternative 1 an inferior product will be marketed that is best suited to low levels of demand whereas alternative 2 is a superior product that is best suited to high levels of demand. There are only two possible levels of demand - high and low and the probabilities of each event occurring is 0.5. The predicted profits for each alterative are:
-Refer to Figure 12-3. Using the data above relating to the Lee Company, which alternative should be selected using the maximin criterion?
A) Neither alternative
B) Alternative 1
C) Alternative 2
D) It is not possible to use the maximin criterion for the data given.

Question

Figure 12-3
The Lee Company must choose between two mutually exclusive alternatives. With alternative 1 an inferior product will be marketed that is best suited to low levels of demand whereas alternative 2 is a superior product that is best suited to high levels of demand. There are only two possible levels of demand - high and low and the probabilities of each event occurring is 0.5. The predicted profits for each alterative are: 
-Refer to Figure 12-3. Using the data above relating to the Lee Company, which alternative should be selected using the maximin criterion?
A) Neither alternative 
B) Alternative 1 
C) Alternative 2 
D) It is not possible to use the maximin criterion for the data given.

Quizplus · Accepted Answer

The maximin criterion involves selecting the alternative with the highest minimum payoff. By comparing the minimum payoffs of each alternative, Alternative 1 has the highest minimum value.

Figure 12-3 The Lee Company Must Choose Between Two Mutually Exclusive Alternatives