Management at Washington Hospital Center is thinking about two investments. One is an MRI machine, which can make $100,000 in good economic conditions or $60,000 in bad economic conditions. Another is a CT scanner, which can make $150,000 in good economic conditions or $10,000 in bad economic conditions. Thus the decision depends on the economic conditions. What is the probability of good economic conditions that equates the two investments?
a. Develop a payoff table for this situation.
b. Find the following:
- Equal likelihood
- Minimax regret
c. Create a sensitivity graph comparing the different alternatives as the probability of economic conditions changes.