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Decision analysis example

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



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