Even though independent gasoline stations have been having a difficult time, lan Langella has been thinking about starting his own independent gasoline station
Even though independent gasoline stations have been having a difficult time, lan Langella has been thinking about starting his own independent gasoline station. Ian’s problem is to decide how large his station should be. The annual returns will depend on both the size of his station and a number of marketing factors related to the oil industry and demand for gasoline. After a careful analysis, lan developed the following table:
States of Nature
| Size of First Station | Good Market | Fair Market | Poor Market |
|---|---|---|---|
| Small | $60,000 | $21,000 | -$12,000 |
| Medium | $70,000 | $32,000 | -$18,000 |
| Large | $95,000 | $32,500 | -$42,000 |
| Very Large | $280,000 | $24,000 | -$150,000 |
For example, if lan constructs a small station and the market is good, he will realize a profit of $60,000.
This exercise contains only parts b, c, and d.
b) Using the decision making under uncertainty with the criterion of Maximax
The appropriate decision will be _______
