Can you create a sensitivity graph comparing the different alternatives as the probabilities of…

Western Plastic Surgery Associates is planning on opening a cosmetic plastic surgery center in either Honolulu, San Francisco, or Seattle. There is a 60 percent chance that the demand for plastic surgery in the United States will increase in the near future, a 25 percent chance that the number will remain the same, and a 15 percent chance that the number will decrease. The developer estimates that the following profits would result from each decision given each set of economic conditions.

Location

Increase (0.60}

Same (0.25)

Decrease (0.15)

Honolulu

$1,102,000

$856,000

$502,000

San Francisco

$720,000

$640,000

$602„000

Seattle

$800,000

$702,000

$220,000

Find the best decision using the following:

a. Develop a payoff table for this situation.

b. Find the following:

  1. Maximax
  2. Maximin
  3. Equal likelihood
  4. Minimax regret

c. Can you create a sensitivity graph comparing the different alternatives as the probabilities of increase, same, and decrease change? Why or why not?

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