Lecture 4

Question 1

Decision Theory

Answer 1

A particular branch of management science and supports its central tenet - to provide a rational way of doing things

Question 2

Maximin

Answer 2

maximise the minimum payoff given the various decisions which
are possible. By this criterion we look for the minimum payoff for each
decision (row in the payoff matrix).

Question 3

Maximax

Answer 3

maximize the maximum payoff for the different decisions, in a
strategy the reverse of maximin. We identify the maximum payoffs for each
decision (row in the payoff matrix) and then select the one which maximises
the maxima available.

Question 4

Minimax Regret

Answer 4

by this means we construct an opportunity loss or regret

matrix prior to applying the minimax rule.