The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the payoff table shown next, giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown. What would be the best decision if the maximin strategy is used?
A) 1
B) 2
C) 3
D) 4

Question

The national sales manager for "I colored this" (ICT) T-shirts provides all salespersons with the payoff table shown next, giving the estimated profit when a retailer purchases from one to four dozen T-shirts. The probability of demand for each state of nature is also shown.  What would be the best decision if the maximin strategy is used?
A) 1 
B) 2 
C) 3 
D) 4

Quizplus · Accepted Answer

The maximin strategy involves choosing the decision alternative that maximizes the minimum payoff. To determine the minimum payoff for each decision alternative, we find the minimum value in each column.

For decision alternative 1, the minimum payoff is 540 (determined by the minimum value in column 1). 
For decision alternative 2, the minimum payoff is 450 (determined by the minimum value in column 2). 
For decision alternative 3, the minimum payoff is 330 (determined by the minimum value in column 3). 
For decision alternative 4, the minimum payoff is 210 (determined by the minimum value in column 4).

Therefore, the decision alternative that maximizes the minimum payoff is decision alternative 1, which has a minimum payoff of 540.

The National Sales Manager for "I Colored This" (ICT) T-Shirts