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Choosing Between Options With Maximin Criteria

Question

The construction manager for Acme Construction, Inc. must decide whether to build single family homes, apartments, or condominiums. This is not a product-mix problem, but an all-or nothing decision. He will hire workers and rent equipment appropriate for one action only. He estimates annual profits (in thousands of dollars) will vary with population trends as follows:

Dwelling type

Population steady

Population grows slowly

Population grows rapidly

Single family

            $100

            $90

            $70

Apartments

            50

            170

            90

Condominiums

            -20

            100

            220

a. If he uses the maximin criterion, which type of dwellings will he choose to build? Show your supporting calculations.

b. If he uses the equally likely criterion, which kind of dwellings will he choose to build? Show your supporting calculations.

c. If the construction manager were an optimist, what criterion would he choose? What would be the choice of dwelling for that criterion? Show your supporting calculations.

 

Summary

The question belongs to Operations Management and it discusses about a construction company which has to choose between construction of one option among three available options.

Total Word Count 374

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Comments

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