Decision Analysis Example

Blackbeard Phantom’s Fireworks is considering introducing two new bottle

rocket. The company can add both to the current line, neither or just one of the

two. The success of the product depends on consumers’ reactions. The reactions

can be summarised as good (30%), fair (50%) or poor (20%). The company’s

revenue in thousands of dollars, are estimated in the following pay-off table.

Decision

Probability

Neither

Product 1 only

Product 2 only

Both

1.

2.

3.

4.

5.

6.

Good

30%

0

125

105

220

Payoffs table

State of nature

Fair

50%

0

65

60

110

Compute the decision based on maximin

Compute the decision based on maximax

Compute the expected monetary value

Develop an opportunity loss (regret table)

Compute the decision based on minimax regret

Compute the expected opportunity loss (EOL)

Poor

20%

0

30

30

40

Blackbeard Phantom’s Fireworks is considering introducing two new bottle

rocket. The company can add both to the current line, neither or just one of the

two. The success of the product depends on consumers’ reactions. The reactions

can be summarised as good (30%), fair (50%) or poor (20%). The company’s

revenue in thousands of dollars, are estimated in the following pay-off table.

Decision

Probability

Neither

Product 1 only

Product 2 only

Both

1.

2.

3.

4.

5.

6.

Good

30%

0

125

105

220

Payoffs table

State of nature

Fair

50%

0

65

60

110

Compute the decision based on maximin

Compute the decision based on maximax

Compute the expected monetary value

Develop an opportunity loss (regret table)

Compute the decision based on minimax regret

Compute the expected opportunity loss (EOL)

Poor

20%

0

30

30

40

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