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

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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Deepak Kumar Panda
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33 views11 pages

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

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.

Uploaded by

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