What type of decision problem is this? Construct a decision table.
Helen Murvis, hospital administrator for Portland General Hospital, is trying to determine whether to build a large wing onto the existing hospital, a small wing, or no wing at all. If the population of Portland continues to grow, a large wing could return $150,000 to the hospital each year. If the small wing were built, it would return $60,000 to the hospital each year if the population continues to grow. If the population of Portland remains the same, the hospital would encounter a loss of $85,000 if the large wing were built. Furthermore, a loss of $45,000 would be realized if the small wing were constructed and the population remains the same. Unfortunately, Helen does not have any information about the future population of Portland.
(a) What type of decision problem is this?
(b) Construct a decision table.
(c) Using the equally likely criterion, determine the best alternative.
Hardie Lord, Helen Murvis’s boss, is not convinced that Helen used the correct decision technique. (Refer to Problem 3-56.) Hardie believes that Helen should use a coefficient of realism of 0.75 in determining the best alternative. Hardie thinks of himself as a realist.
(a) Develop a decision table for this problem.
(b) Using the criterion of realism, what is the best decision?
(c) Did Hardie’s decision technique result in a decision that was different from Helen’s?
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