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Chapter 7

Example 3

A company is choosing which of three new products to make A, B or C It has
calculated likely pay-offs under three possible scenarios (I, II or III), giving the
following pay-off table:

Profit (loss) Product chosen

Scenario A B C
I 20 80 10

II 40 70 100
III 50 (10) 40

Using maximax, which product would be chosen?

Using maximax, an optimist would consider the best possible outcome for
each product and pick the product with the greatest potential.

Here, ‘C’ would be chosen, with a maximum possible gain of 100.

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