Consider the following decision scenario: $$\begin{array} { c }
{ \text { State of Nature } } \
\begin{array} { | l | l | l | }
\hline & \text { High } & \text { Low } \
\hline \text { Buy } & \$ 80 ^ { * } & 0 \
\hline \text { Rent } & 70 & 30 \
\hline \text { Lease } & 30 & 50 \
\hline
\end{array}\end{array}$$ *PV for profits ($000) The minimax regret strategy would be:
A) buy.
B) lease.
C) rent.
D) high.
E) low.

Question

Consider the following decision scenario: $$\begin{array} { c } 
 { \text { State of Nature } } \
\begin{array} { | l | l | l | } 
\hline & \text { High } & \text { Low } \
\hline \text { Buy } & \$ 80 ^ { * } & 0 \
\hline \text { Rent } & 70 & 30 \
\hline \text { Lease } & 30 & 50 \
\hline
\end{array}\end{array}$$ *PV for profits ($000) The minimax regret strategy would be:
A) buy.
B) lease.
C) rent.
D) high.
E) low.

Quizplus · Accepted Answer

The minimax regret strategy involves minimizing the maximum regret. Calculating the regret for each decision:  - For "High": Buy (0), Rent (10), Lease (50)  - For "Low": Buy (50), Rent (20), Lease (0)  The maximum regrets are: Buy (50), Rent (20), Lease (50). The minimum of these maximum regrets is 20, which corresponds to the "Rent" option.

Consider the Following Decision Scenario *PV for Profits ($000) the Minimax Regret Strategy Would Be