Below is an opportunity loss table What decision should be m

Below is an opportunity loss table. What decision should be made based on the minimax regret criterion? State of Nature Alternatives A B C Alternative 1 30 0 10 Alternative 2 5 20 0 Alternative 3 0 20 25 Alternative 1 Alternative 2 Alternative 3 State of Nature C Does not matter Sales for boxes of Girl Scout cookies over a 4-month period were forecasted as follows 100, 120, 115, and 126 The actual results over the 4-month period were as follows 110, 114, 119, 115. What was the MAD of the 4-month forecast? 5 0 108 7

Solution

Minimax Regret criterion is based on the assumption that the decision maker might experience regret after he/she has made the decision and the events have occured and would like to select the alternaive which will minimize the maximum possible regret.

Alternative 1

Minimum of maximum regrets is 20 corresponding to Alternative 2

MAD stands for Mean Absolute Deviation = Sum of Absolute differences between actual and forecasted values / Number of observations as follows:

1

From above either the values given are wrong or the choices given are wrong

Alternative/State	A	B	C	Maximum Regret
Alternative 1	30	0	10	30
Alternative 2	5	20	0	20
Alternative 3	0	20	25	25