Consider the following to answer the question(s) below:
A group is planning a fundraising concert. They must decide whether to hold the event indoors or out. The weather, specifically, whether or not it rains that day, will affect the amount raised by the event. The payoff table is shown below:
Action Weather Conditions

-According to the maximin approach, the group should
A) hold the concert indoors.
B) hold the concert outdoors.
C) hold the concert outdoors if it does not rain.
D) hold the concert indoors if it rains.
E) hold the concert indoors if it does not rain.

Question

Consider the following to answer the question(s) below:
A group is planning a fundraising concert. They must decide whether to hold the event indoors or out. The weather, specifically, whether or not it rains that day, will affect the amount raised by the event. The payoff table is shown below:
Action Weather Conditions
 
-According to the maximin approach, the group should
A) hold the concert indoors. 
B) hold the concert outdoors. 
C) hold the concert outdoors if it does not rain. 
D) hold the concert indoors if it rains. 
E) hold the concert indoors if it does not rain.

Quizplus · Accepted Answer

The maximin approach assumes that the decision maker is risk-averse and wants to minimize the worst possible outcome. Therefore, we need to choose the option that has the highest minimum payoff. 
If the concert is held indoors, the worst possible outcome is to raise $500. 
If the concert is held outdoors and it rains, the worst possible outcome is to raise $300. 
If the concert is held outdoors and it does not rain, the worst possible outcome is to raise $600. 
The highest minimum payoff is associated with holding the concert indoors, so the group should choose to hold the concert indoors.

Consider the Following to Answer the Question(s) Below