ExampleA food products company is thinking the introduction of a

revolutionary new product with new packaging or replace

the existing product at much higher price (S1) or a moderate
change in the composition of the existing product with a new
packaging at a small increase in price (S2) or a small change
in the composition of the existing product except the word
New with a negligible increase in price (S3).
The three possible states of nature or events are:
1
High increase in sales (N1)
2
No change in sales (N2)
3
Decrease in sales (N3)
The marketing department of the company worked out the
payoffs in terms of yearly net profits for each of the
strategies of the three events (expected sales). This is
represented in the following table:
Strategies

N1

N2

N3

S1
S2
S3

7,00,000
5,00,000
3,00,000

3,00,000
4,50,000
3,00,000

1,50,000
0
3,00,000

Which strategy should be concerned executive choose on the

basis of
1
Maximin Criterion
2
Maximax Criterion
3
Laplace Criterion?
4
Minimax regret Criterion

ExampleA marketing manager of a computer manufacturer is to

choose from three alternatives.
1 Modify the existing PC to improve its design and
processing power.
2 Launch a new PC having latest technology.
3 Do nothing, i.e. leave the PC as it is.
There are three states of nature that affect the pay-off from
each of the alternative strategies. These states of nature are:
1 A competitor may launch a new PC with latest
technology.
2 The government may impose high excise duty on the
manufacture of PCs and reduce excise to minimum on
laptops to encourage the use of laptops.
3 Conditions will remain the same as they are.
Pay-off Matrix
Strategies
S1 (Modify)
S2 (New Prod.)
S3 (Do Nothing)

Same
Condition
7,00,000
10,00,000
5,00,000

New
Competitor
5,00,000
3,00,000
1,00,000

Govt. Ban
-5,00,000
-13,00,000
-2,00,000

Which strategy should be concerned executive choose on the

basis of
1 Maximin Criterion
2 Maximax Criterion
3 Laplace Criterion?
4 Minimax regret Criterion