Question

Given the following pay-off matrix (in rupees) for three strategies and two states of nature.

Strategy	States-of-nature
	E1	E2
S1	40	60
S2	310	-20
S3	-40	150

Select a strategy using each of the following rules (i) Maximin (ii) Minimax.

Answer 1

(i) Maximin principle

Max (40, -20, -40) = 40. Since the maximum pay-off is Rs.40, the best strategy is S₁ according to maximin rule. 

(ii) Minimax principle

Min (60, 10, 150) = 10. Since the minimum pay- off is Rs. 10, the best strategy is S₂ according to minimax rule.