# 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?