Jeff sells the New York Times Sunday newspaper at a city corner near several churches. He sells each newspaper for $6.50 after purchasing them for $4.00. Any unsold newspaper can be returned to the New York Times for a $0.75 credit. Jeff expects demand on Sunday to be 75, 100, 125, or 150 newspapers and would like to order one of these four quantities from the New York Times. If the Jeff uses the minimax regret criterion, how many newspapers will he order?
A)100
B)75
C)125
D)150

Question

Quizplus · Accepted Answer

The minimax regret criterion involves calculating the regret for each possible demand and order quantity, then choosing the order quantity that minimizes the maximum regret. After calculating the regrets for each scenario, ordering 100 newspapers results in the lowest maximum regret.

Jeff Sells the New York Times Sunday Newspaper at a City