1.

Pessimistic Approach
Optimistic Approach Minimax Regret Criterion Laplace Equally Likely Average

2.

3.

4.

1.

MAXIMIN Selecting the best course of action

STATE OF NATURE PERFORMANCE S1 16 100 -50 S2 140 90 -20 S3 100 80 0 16 80 -50 80 MIN. PAY OFF MAX OF MIN PAY OFF

STRATEGY

Acts A1 A2 A3

A2 IS THE BEST COURSE OF ACTION

2. MINIMAX
Selecting the best course of action
STRATEGY STATE OF NATURE PERFORMANCE MAX. PAY OFF MIN OF MAX PAY OFF

Acts
A1 A2 A3

S1
16 100 -50

S2
140 90 -20

S3
100 80 0 140 100 0 0

A3 IS THE BEST COURSE OF ACTION

1.

MAXIMAX Selecting which car to launch

STATE OF NATURE MARKET ACCEPTANCE MAX. PAY OFF MAX OF MAX PAY OFF

STRATEGY

Model A1= Premium

S1= high 6000

S2= moderate S3= low 2800 1800 6000

A2= Economy

7800

3000

-1200

7800

7800

A2= GENERAL IS THE BEST COURSE OF ACTION

2. MINMIN
Selecting the best course of action
STRATEGY STATE OF NATURE PERFORMANCE MIN. PAY OFF MIN OF MIN PAY OFF

Model A1 A2

S1 6000 7800

S2 2800 3000

S3 1800 -1200 1800 -1200 -1200

A2= GENERAL IS THE BEST COURSE OF ACTION

ACTS E1 A1 A2 A3 18 14 16

STATE OF NATURE E2 9 11 16 E3 14 17 11

ACTS
E1 A1 A2 A3

STATE OF NATURE

MAX REGRET

MIN. OF MAX REGRET

E2 16-9= 7 16-11= 5 16-16= 0

E3 17-14= 3 17-17= 0 17-11= 6 7 5 6 5

18-18= 0 18-14= 4 18-16= 2

Find the best course of action

ACTS
STATE OF NATURE AVERAGE PAY-OFF

E1
A1 200

E2
400

E3
600 200+400+600 =400 3 100+200+300 =200 3 600+300+600 =500 3

MAX OF AVG. PAYOFF

A2

100

200

300

A3

600

300

600

500

A3 IS THE BEST COURSE OF ACTION

Compiled by
Anishi Khetan Kartik Kothari

Luv Joukani
Manali Jain