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  • Decision Making Environment: Decision Making Under Certainty Decision Making Under Uncertainty

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    Deepak Kumar Panda
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    This document discusses various decision making criteria under uncertainty including maximax, maximin, minimax regret, Hurwicz, and Laplace criteria. It provides an example applying each criterion to three alternatives - expanding an existing plant, constructing a new plant, or subcontracting - under different potential demand states. Maximax selects the alternative with the highest possible outcome while maximin selects the one with the lowest possible loss. Minimax regret minimizes the maximum regret from not choosing the best outcome. Hurwicz and Laplace criteria involve calculating weighted averages of the minimum and maximum or expected values of each alternative's outcomes.

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    This document discusses various decision making criteria under uncertainty including maximax, maximin, minimax regret, Hurwicz, and Laplace criteria. It provides an example applying each criterion to three alternatives - expanding an existing plant, constructing a new plant, or subcontracting - under different potential demand states. Maximax selects the alternative with the highest possible outcome while maximin selects the one with the lowest possible loss. Minimax regret minimizes the maximum regret from not choosing the best outcome. Hurwicz and Laplace criteria involve calculating weighted averages of the minimum and maximum or expected values of each alternative's outcomes.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    4 views11 pages

    Decision Making Environment: Decision Making Under Certainty Decision Making Under Uncertainty

    Uploaded by

    Deepak Kumar Panda
    This document discusses various decision making criteria under uncertainty including maximax, maximin, minimax regret, Hurwicz, and Laplace criteria. It provides an example applying each criterion to three alternatives - expanding an existing plant, constructing a new plant, or subcontracting - under different potential demand states. Maximax selects the alternative with the highest possible outcome while maximin selects the one with the lowest possible loss. Minimax regret minimizes the maximum regret from not choosing the best outcome. Hurwicz and Laplace criteria involve calculating weighted averages of the minimum and maximum or expected values of each alternative's outcomes.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 11

    Decision Making Environment

    Decision Making under Certainty

    Decision Making under Uncertainty

    Decision Making under Risk

    Decision Making under Conflict


    Decision Making under Uncertainty

    Maximax Criterion or Criterion of Optimism

    Maximin Criterion or Criterion of Pessimism

    Minimax Regret Criterion

    Hurwicz Critterion or Criterion of Realism

    Laplace Criterion
    Alternatives States of nature or Demand Minimum
    of row
    High Moderate Low Nil

    Expand the 50000 25000 -25000 -45000 50000


    present plant
    Construct a 70000 30000 -40000 -80000 70000
    new plant
    Subcontract 30000 15000 -1000 -10000 30000

    Maximax Criterion
    Alternatives States of nature or Demand Maximum
    of row
    High Moderate Low Nil

    Expand the 50000 25000 -25000 -45000 -45000


    present plant
    Construct a 70000 30000 -40000 -80000 -80000
    new plant
    Subcontract 30000 15000 -1000 -10000 -10000

    Maximin Criterion
    Alternatives States of nature or Demand Minimum
    High Moderate Low Nil of row

    Expand the 70000- 30000- -1000-(- -10000-(- 35000


    present 50000= 25000= 25000)= 45000)=
    plant 20000 5000 24000 35000
    Construct a 70000- 30000- -1000-(- -10000-(- 70000
    new plant 70000 30000= 40000)= 80000)=
    0 0 39000 70000
    Subcontract 70000- 30000- -1000-(- -10000-(- 40000
    30000 15000= 1000)= 10000)=
    40000 15000 0 0
    Minimax Regret Criterion
    Alternatives States of nature or Demand Max of Min of P=w(m
    High Moderate Low Nil row row ax)+(1-
    w)min
    w=0.8

    Expand the 50000 25000 -25000 -45000 50000 -45000 31000


    present plant
    Construct a 70000 30000 -40000 -80000 70000 -80000 40000
    new plant
    Subcontract 30000 15000 -1000 -10000 30000 -10000 22000
    Hurwicz criterion
    Max P=w(max)+(1-w)(min)
    Alternatives States of nature or Demand

    High Moderate Low Nil


    Prob 1/4 Prob 1/4 Prob 1/4 Prob 1/4

    Expand the 50000 25000 -25000 -45000


    present plant
    Construct a new 70000 30000 -40000 -80000
    plant
    Subcontract 30000 15000 -1000 -10000

    Laplace Criterion
    Alternatives States of nature or Demand Minimum
    of row
    High Moderate Low Nil

    Expand the 50000 x 25000 x 1/4 -25000x -45000x -1250


    present plant 1/4 1/4 1/4
    Construct a 70000x 30000x 1/4 -40000x -80000x -5000
    new plant 1/4 1/4 1/4
    Subcontract 30000x 15000x 1/4 -1000x1/4 -10000x1/4 8500
    1/4
    Laplace Criterion

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