A Manager Is Deciding Whether or Not to Build a Small

question 10

Essay

A manager is deciding whether or not to build a small facility.Demand is uncertain and can be either at a high or low level.If the manager chooses a small facility and demand is low, the payoff is $100.If the manager chooses a small facility and demand is high, the payoff is $300.On the other hand, if the manager chooses a large facility and demand is low, the payoff is -$200, but if demand is high, the payoff is $800.
(a)What would be the best decision based on the Laplace criterion?
(b)What would be the best decision based on Hurwicz's criterion of realism using α = 0.6?

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Definitions:

Reaction

A process in which substances (reactants) interact to form new substances (products) with different properties.

Organic Chemistry

The branch of chemistry that studies the structure, properties, composition, reactions, and preparation of compounds that contain carbon.

4-methyl-1-pentanol

An organic compound and a type of alcohol, known for its application in solvents and intermediates in the synthesis of other compounds.

Major Organic Product

In organic chemistry reactions, this term specifies the predominant product formed from the reactants, accounting for the greatest yield among all products.