An individual must decide whether or not to pursue a business opportunity. If he does pursue the opportunity, then he will get a $20 profit if the business is successful and a $10 loss if the business fails. Apply the maximin and minimax regret criteria to this decision.
A) Maximin: Do not invest. Minimax regret: Do not invest.
B) Maximin: Do not invest. Minimax regret: Invest.
C) Maximin: Invest. Minimax regret: Do not invest.
D) Maximin: Invest. Minimax regret: Invest.

Question

Quizplus · Accepted Answer

Maximin criterion suggests choosing the option with the best worst-case scenario, which is not investing (0 loss). Minimax regret involves minimizing the maximum regret, which suggests investing to avoid the regret of missing out on a $20 profit.

An Individual Must Decide Whether or Not to Pursue a Business