Example-

A 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 7,00,000 3,00,000 1,50,000

S2 5,00,000 4,50,000 0
S3 3,00,000 3,00,000 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
Example-

A 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 Same New Govt. Ban

Condition Competitor
S1 (Modify) 7,00,000 5,00,000 -5,00,000
S2 (New Prod.) 10,00,000 3,00,000 -13,00,000
S3 (Do Nothing) 5,00,000 1,00,000 -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