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Question

The construction manager for Acme Construction, Inc. must decide whether to build single family homes, apartments, or condominiums. This is not a product-mix problem, but an all-or nothing decision. He will hire workers and rent equipment appropriate for one action only. He estimates annual profits (in thousands of dollars) will vary with population trends as follows:


Dwelling type Population steady Population grows slowly Population grows rapidly
Single family $100 $90 $70
Apartments 50 170 90
Condominiums -20 100 220

a. If he uses the maximin criterion, which type of dwellings will he choose to build? Show your supporting calculations.

b. If he uses the equally likely criterion, which kind of dwellings will he choose to build? Show your supporting calculations.

c. If the construction manager were an optimist, what criterion would he choose? What would be the choice of dwelling for that criterion? Show your supporting calculations.

Answer

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