Payoff table
Payoff when advertising is applied for each scenario= profit increase in that scenario- cost of advertizing
| Highly successful | Moderately successful | Unsuccessful | |
| Invest in advertising | 225000 | 45000 | -75000 |
| Not invest in advertising | 0 | 0 | 0 |
2. Expected money criteria
Expected payoff if invested in advertising= probability of highly successful* payoff of highly succesful+probability of moderately successful* payoff of moderately succesful+probability of unsuccessful* payoff of unsuccessful = 0.2*225000+0.5*45000+0.3*(-75000)=45000
The expected payoff if not invested=0
3. most likely event criterion to find the best action
Most likely event if invested is that advertizing in moderately successful and thus the payoff is 45000 and the most likely scenario if not invested in not investing is all 3 which have payoff of0. Hence we would invest in advertising.
4.
| Highly successful | Moderately successful | Unsuccessful | ||
| Invest in advertising | 225000 | 45000 | -75000 | |
| Not invest in advertising | 0 | 0 | 0 | |
| Highly successful | Moderately successful | Unsuccessful | ||
| The maximum payoff in each scenario | 225000 | 45000 | 0 | |
| Regret=Maximum payoff-Situation payoff | ||||
| Maximum payoff- situation payoff | Highly successful | Moderately successful | Unsuccessful | Maximum regret |
| Invest in advertising | 0 | 0 | 75000 | 75000 |
| Not invest in advertising | 225000 | 45000 | 0 | 225000 |
As we can see minimum of maximum regret happens in Situation 1 when invested in advertising, hence we would invest in advertizing
