Assignment 2 – GA02298

a) Laplace Criterion

Alternative High Demand Low Demand Row Average

Small Facility 100 300 (100+300)/2 = 200
Large Facility 800 -200 (800+(-200))/2 = 300
Do Nothing 0 0 0

If manager using Laplace Criterion he will choose Large Facility which is highest overall
payoff = $300.

b) Hurwicz’s Criterion

Alternative High Demand Low Demand Optimistic

Small Facility 100 300 220
Large Facility 800 -200 400
Do Nothing 0 0 0

Weighted = 0.60
Small Facility = (0.60)(300) + (1-0.60)(100)
=180 + 40
=220

Large Facility = (0.60)(800) + (1-0.60)(-200)

=480 + (-80)
=400

If manager using Hurwicz’s Criterion, he will choose Large Facility which is highest overall
payoff = $400.