The Golden Jill Mining Company is interested in procuring 10,000 acres of coal mines in Powder River Basin. The mining company is considering two payment-plan options to buy the mines:
I. 100% Payment
II. Installment-Payment
The payoff received will be based on the quality of coal obtained from the mines which has been categorized as High, Normal, and Poor Quality as well as the payment plan. The profit payoff in million dollars resulting from the various combinations of options and quality are provided below: $$\begin{array} { | l | c | c | c | }
\hline { \text { Payment-Plan Options } } & & { \text { Quality } } & \
\hline & \text { High } & \text { Normal } & \text { Poor } \
\hline \mathbf { 1 0 0 \% } \text { Payment } & 450 & 320 & - 250 \
\hline \text { Installment-Payment } & 350 & 300 & - 110 \
\hline
\end{array}$$
a. What is the decision to be made, what is the chance event, and what is the consequence for this problem? How many decision alternatives are there? How many outcomes are there for the chance event?
b. If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

Question

The Golden Jill Mining Company is interested in procuring 10,000 acres of coal mines in Powder River Basin. The mining company is considering two payment-plan options to buy the mines:
I. 100% Payment
II. Installment-Payment
The payoff received will be based on the quality of coal obtained from the mines which has been categorized as High, Normal, and Poor Quality as well as the payment plan. The profit payoff in million dollars resulting from the various combinations of options and quality are provided below: $$\begin{array} { | l | c | c | c | } 
\hline  { \text { Payment-Plan Options } } & & { \text { Quality } } & \
\hline  & \text { High } & \text { Normal } & \text { Poor } \
\hline \mathbf { 1 0 0 \% } \text { Payment } & 450 & 320 & - 250 \
\hline \text { Installment-Payment } & 350 & 300 & - 110 \
\hline
\end{array}$$ 
a. What is the decision to be made, what is the chance event, and what is the consequence for this problem? How many decision alternatives are there? How many outcomes are there for the chance event?
b. If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

Quizplus · Accepted Answer

The Answer of The Golden Jill Mining Company is interested in procuring 10,000 acres of coal mines in Powder River Basin. The mining company is considering two payment-plan options to buy the mines:
I. 100% Payment
II. Installment-Payment
The payoff received will be based on the quality of coal obtained from the mines which has been categorized as High, Normal, and Poor Quality as well as the payment plan. The profit payoff in million dollars resulting from the various combinations of options and quality are provided below: $$\begin{array} { | l | c | c | c | } 
\hline  { \text { Payment-Plan Options } } & & { \text { Quality } } & \
\hline  & \text { High } & \text { Normal } & \text { Poor } \
\hline \mathbf { 1 0 0 \% } \text { Payment } & 450 & 320 & - 250 \
\hline \text { Installment-Payment } & 350 & 300 & - 110 \
\hline
\end{array}$$ 
a. What is the decision to be made, what is the chance event, and what is the consequence for this problem? How many decision alternatives are there? How many outcomes are there for the chance event?
b. If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches?

The Golden Jill Mining Company Is Interested in Procuring 10,000