Question

Calculation:

The director of social services of a county has learned that the state has mandated additional information requirements. This will place an additional burden on the agency. The director has identified three acceptable alternatives to handle the increased workload. One alternative is to reassign present staff members, the second is to hire and train new workers, and the third is to redesign current practice so that workers can readily collect information with little additional effort. An unknown factor is the caseload for the coming year when the new data will be collected on a trial basis. The estimated costs for various options and caseloads are shown in the following table.

	Caseload
Alternative	Moderate	High	Very High
Reassign staff	$80*	75	85
New staff	70	90	60
Redesign collection	65	80	70

^*Cost in $ thousands

What decision would be appropriate using each of the following criteria? (20%)

a.Maximin.

b.Maximax.

c.Minimax regret.

d.Lapalce.

Answer 1

(a)

Maximin: Select the alternative which gives the maximum of the minimum payoffs

Best alternative - Reassign staff.

(b)

Maximax: Select the alternative which gives the maximum of the maximum payoffs

(c)

Minimax regret

First, develop the Regret matrix by subtracting each element from the respective column maximum.

Then, select the alternative which gives the minimum of the maximum regrets.

The best alternative is either Reassign staff or Redesign collection

(d)

Laplace: Select the alternative which gives the maximum of the average (equal probability) payoffs.

Best alternative - Reassign staff.