Dan Hein owns the mineral and drilling rights to a 1,000 acre tract of land.If he drills a well and does not strike oil, his net loss will be $50,000, but if he drills a well and strikes oil, his net gain will be $100,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $1000.The probability of the state of nature "oil in the tract" is unknown.If Dan is an optimist, he would choose the _____________.
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy

Question

Quizplus · Accepted Answer

As an optimist, Dan would choose the maximax criterion which maximizes the potential gain.

Dan Hein Owns the Mineral and Drilling Rights to a 1,000