CONSERVATIVE/PESSIMISTIC APPROACH MAXMINI

This equation is used to solve a  two (2) state of nature decision analysis. The pessimistic approach first gets the minimum or worse payoff then the maximum of all the minimum, not clear? check out the example below

EXAMPLE

Given the Following

                     S1       S2      

Action                                     MIN                  MAX

D1              20          25          20                      20

D2              30          15         15                                                             

D3              40          10         10                                                          

D1 is the best option when using MaxMini approach

REFERENCES

Gichuhi, K J & Ndung'u, N D (2013) Quantitative Methods for Business Management : Decision Analysis and Trees. Nairobi : Finesse.

Investopedia (2015) Expected Value. Retrieved on 23rd March 2015 From : http://www.investopedia.com/terms/e/expected-value.asp