1.

The research department of Hindustan Ltd. has recommended paying the marketing department to launch a shampoo of three different types. The marketing types of shampoo to be launched under the following estimated pay-offs for various levels of sales.Types of ShampooEstimated Sales (in Units)15000100005000Egg Shampoo301010Clinic Shampoo40155Deluxe Shampoo55203What will be the marketing manager’s decision if (i) Maximin and (ii) Minimax principle applied?

Answer»

(i) Maximin principle

Types of ShampooEstimated Sales (in Units)Minimum pay - off
15000100005000
Egg Shampoo30101010
Clinic Shampoo401555
Deluxe Shampoo552033

Max (10, 5, 3) = 10. Since the maximum pay-off is 10 units, the marketing manager has to choose Egg shampoo by Maximin rule.

(ii) Minimax principle

Types of ShampooEstimated Sales (in Units)Maximum pay - off
15000100005000
Egg Shampoo30101030
Clinic Shampoo4015540
Deluxe Shampoo5520355

Min (30, 40, 55) = 30. Since the minimum pay-off is 30 units, the marketing manager has to choose Egg shampoo by minimax rule.



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