Answer:
a) the small bus
b) the medium or the larger bus
c) the small bus
Explanation:
a) under the maximin criterion the manager will want to maximise the minimum possible profit (pessimistic criterion) , thus the profits will be
Bus size Demand
Low Medium High
Small 50 60 70 → min profit = 50
Medium 40 80 90 → min profit = 40
Large 20 50 120 → min profit = 20
therefore the option with maximum minimum profit is the small size
b) under the maximin criterion the manager will want to minimise the maximum possible loss , thus the losses respect with the best profit option will be
Bus size Demand
Low Medium High
Small 0 -20 -50 → max loss= -50
Medium -10 0 -30 → max loss = -30
Large -30 -30 0 → max loss = -30
therefore the option with minimum maximum loss is the medium or the large one
c) for the expected value of each option
small = 30/100*50 +30/100*60 +40/100*70 = 61
medium = 30/100*40 +30/100*80 +40/100*90 = 72
large = 30/100*20 +30/100*50 +40/100*120 = 69
then the small bus option is the better one, since it has the maximum expected profit
