If he uses the Laplace criterion, which alternative will he decide to select?
A)do nothing
B)expand
C)build new
D)either do nothing or expand
E)either expand or build new

Question

Quizplus · Accepted Answer

The Laplace criterion is based on the maximum expected value, where each alternative's payoff is multiplied by its probability of occurrence. 
For alternative A, the expected value is 0.3(3) + 0.4(4) + 0.3(5) = 4 
For alternative B, the expected value is 0.5(5) + 0.5(6) = 5.5 
For alternative C, the expected value is 0.6(7) + 0.4(2) = 4.6

Therefore, the best choice is alternative E, either to expand or build new, based on the highest expected value of 5.5.

If He Uses the Laplace Criterion, Which Alternative Will He