Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy. They have three policies to choose from, A, B and C. The policies differ with respect to price, coverage and ease of billing. The company has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.
-Every nonprobabilistic method has a weakness for decision making. Which of the following is incorrect regarding a method and its weakness?
A) The maximax method ignores potentially large losses.
B) The maximin method ignores potentially large payoffs.
C) The minimax regret method can lead to inconsistent decisions.
D) All of these are correct.

Question

Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy. They have three policies to choose from, A, B and C. The policies differ with respect to price, coverage and ease of billing. The company has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.  
-Every nonprobabilistic method has a weakness for decision making. Which of the following is incorrect regarding a method and its weakness?
A) The maximax method ignores potentially large losses. 
B) The maximin method ignores potentially large payoffs. 
C) The minimax regret method can lead to inconsistent decisions. 
D) All of these are correct.

Quizplus · Accepted Answer

Each statement accurately describes a weakness of the respective nonprobabilistic decision-making method: A) Maximax method focuses on the maximum possible gain, ignoring potential losses. B) Maximin method focuses on minimizing the worst-case scenario, ignoring potential high gains. C) Minimax regret method focuses on minimizing regret, which can lead to decisions that are inconsistent with other decision-making criteria.

Exhibit 14.8 The Following Questions Use the Information Below