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In: Finance

Alex wants to invest in one of three companies. The performanceof his investment depends on...

Alex wants to invest in one of three companies. The performance of his investment depends on whether demand for the company’s products are high, average, or low. The following regret table will help Alex make his decision:


High Demand

Low Demand

Average Demand

Anton’s Apps

$0

$2100

$9300

Klinker’s Cabs

$20,000

$500

$0

Mackenzie’s Motors

$9,300

$0

$6700

If Alex were to use minimax regret criteria, which company would he choose?

Solutions

Expert Solution

IN minimax criteria we choose the one with the smallest of losses i.e. anton's apps

because it has the lowest demand in peak season and also on addition it has the lowest total demand therefore according to minimax criterian Anton's apps should be chosen

business high demand low demand average demand total demand
anton apps 0 2100 9300 11400
klinker cabs 20000 500 0 20500
mackenzie's motors 9300 0 6700 16000

jeff jeffy answered 2 years ago
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