Question

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 Shampoo	Estimated Sales (in Units)
	15000	10000	5000
Egg Shampoo	30	10	10
Clinic Shampoo	40	15	5
Deluxe Shampoo	55	20	3

What will be the marketing manager’s decision if (i) Maximin and (ii) Minimax principle applied?

Answer 1

(i) Maximin principle

Types of Shampoo	Estimated Sales (in Units)			Minimum pay - off
	15000	10000	5000
Egg Shampoo	30	10	10	10
Clinic Shampoo	40	15	5	5
Deluxe Shampoo	55	20	3	3

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 Shampoo	Estimated Sales (in Units)			Maximum pay - off
	15000	10000	5000
Egg Shampoo	30	10	10	30
Clinic Shampoo	40	15	5	40
Deluxe Shampoo	55	20	3	55

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