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Mansci Reviewer

The document discusses various decision-making criteria under uncertainty, including the Laplace Criterion, Maximax, Minimin, Maximin, Minimax, Minimax Regret, and Hurwicz Criterion. It presents payoff matrices for different strategies and conditions, calculating expected payoffs and identifying the best alternatives for each criterion. The analysis helps in making rational decisions based on different risk attitudes and payoff scenarios.

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sixcenzo
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23 views5 pages

Mansci Reviewer

The document discusses various decision-making criteria under uncertainty, including the Laplace Criterion, Maximax, Minimin, Maximin, Minimax, Minimax Regret, and Hurwicz Criterion. It presents payoff matrices for different strategies and conditions, calculating expected payoffs and identifying the best alternatives for each criterion. The analysis helps in making rational decisions based on different risk attitudes and payoff scenarios.

Uploaded by

sixcenzo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DECISION UNDER UNCERTAINTY

1. LAPLACE CRITERION / EQUAL PROBABILITY / RATIONALITY / BAYES’


CRITERION
- The following matrix gives the payoff of different strategies (alternatives) S1, S2, S3, S4
against conditions (events) N1, N2, N3, N4

FORMULA: 1/N [ P1 + P2 + P3 … + Pn ]

N1 N2 N3 N4 E.P

S1 1000 1500 750 0 812.5

S2 250 2000 3750 3000 2250

S3 -500 1250 3000 4750 2125

S4 -1250 500 2250 4000 1450

EXPECTED PAYOFF: FORMULA: 1/N [ P1 + P2 + P3 … + Pn ]


(maximum value - payoff matrix)
(minimum value - cost matrix)

S1 = ¼ [ 1000 + 1500 + 750 + 0 ]


= ¼ [ 3250 ]
= 812.50

S2 = ¼ [ 250+ 2000 + 3750 +3000 ] PAYOFF: S2 = 2,250


= ¼ [ 9000 ]
= 2,250

S3 = ¼ [ - 500 + 1250 + 3000 + 4750 ]


= ¼ [ 8500 ]
= 2,125

S4 = ¼ [ -1250 + 500 + 2550 + 4000 ] COST: S4 = 1,450


= ¼ [ 5800 ]
= 1450
2. CRITERION OF OPTIMISM

A. MAXIMAX CRITERION - PAYOFF MATRIX


- Firstly find the highest value of each alternatives

N1 N2 N3 N4 MAXIMUM

S1 1000 1500 750 0 1500

S2 250 2000 3750 3000 3750

S3 -500 1250 3000 4750 4750

S4 -1250 500 2250 4000 4000


= S3 (4750) IS THE BEST ALTERNATIVE

B. MINIMIN CRITERION - COST MATRIX


- Firstly find the lowest value of each alternatives

N1 N2 N3 N4 MINIMUM

S1 1000 1500 750 0 0

S2 250 2000 3750 3000 250

S3 -500 1250 3000 4750 -500

S4 -1250 500 2250 4000 -1250


= S4 ( -1250 ) IS THE BEST ALTERNATIVE
3. CRITERION OF PESSIMISM (WALD CRITERION)

A. MAXIMIN CRITERION - PAYOFF MATRIX


- Firstly find the lowest values of each alternatives
- After finding the lowest values, select the highest among them.

N1 N2 N3 N4 MINIMUM

S1 1000 1500 750 0 0

S2 250 2000 3750 3000 250

S3 -500 1250 3000 4750 -500

S4 -1250 500 2250 4000 -1250


= S2 ( 250 ) IS THE BEST ALTERNATIVE

B. MINIMAX CRITERION - COST MATRIX


- Firstly find the highest values of each alternatives
- After finding the highest values, select the lowest among them.

N1 N2 N3 N4 MAXIMUM

S1 1000 1500 750 0 1500

S2 250 2000 3750 3000 3750

S3 -500 1250 3000 4750 4750

S4 -1250 500 2250 4000 4000


= S1 ( 1500 ) IS THE BEST ALTERNATIVE
4. MINIMAX REGRET CRITERION (SAVAGE CRITERION)

A. MAXIMIZATION PROBLEM - PAYOFF MATRIX


- (REGRET TABLE) MAXIMUM PAYOFF - PAYOFF
- After the formula, apply Minimax Criterion

N1 N2 N3 N4

S1 1000 1500 750 0

S2 250 2000 3750 3000

S3 -500 1250 3000 4750

S4 -1250 500 2250 4000

N1 N2 N3 N4 MAXIMUM

S1 0 500 3000 4750 4750

S2 750 0 0 1750 1750

S3 1500 750 750 0 1500

S4 2250 1500 1500 750 2250


= S3 ( 1500 ) IS THE BEST ALTERNATIVE

B. MINIMIZATION PROBLEM
- (REGRET TABLE) COST - MINIMUM COST
- After the formula, apply Minimax Criterion

N1 N2 N3 N4

S1 1000 1500 750 0

S2 250 2000 3750 3000

S3 -500 1250 3000 4750

S4 -1250 500 2250 4000


N1 N2 N3 N4 MAXIMUM

S1 2250 1000 0 0 2250

S2 1500 1500 3000 3000 3000

S3 750 750 2250 4750 4750

S4 0 0 1500 4000 4000


= S1 ( 2250 ) IS THE BEST ALTERNATIVE

5. HURWICZ CRITERION / CRITERION OF REALISM ( WEIGHTED AVR. CRITERION )

A. MAXIMIZATION PROBLEM - PAYOFF MATRIX


- Firstly find the highest value of each alternatives
- Second, find the lowest value of each alternatives
- W.O = α ( max ) + ( 1 - α ) min, wherein α = 0.6
If α is not given, α = 0.5

N1 N2 N3 N4 MAX MIN WO

S1 1000 1500 750 0 1500 0 900

S2 250 2000 3750 3000 3750 250 2350

S3 -500 1250 3000 4750 4750 -500 2650

S4 -1250 500 2250 4000 4000 -1250 1900


= S3 ( 2650 ) IS THE BEST ALTERNATIVE

B. MINIMIZATION PROBLEM
- Firstly find the lowest value of each alternatives
- Second, find the highest value of each alternatives
- W.O = α ( min ) + ( 1 - α ) max
If α is not given, α = 0.5

N1 N2 N3 N4 MIN MAX WO

S1 1000 1500 750 0 0 1500 750

S2 250 2000 3750 3000 250 3750 2000

S3 -500 1250 3000 4750 -500 4750 2,125

S4 -1250 500 2250 4000 -1250 4000 1375


= S1 IS THE BEST ALTERNATIVE

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