Answer Happy

13. An entertainment company is organizing a pop concert in London. The company has to decide how much it should spend on publicizing the event and three options have been identified: Option 1: Advertising only in the music press; Option 2: As option 1 but also advertise in the national press; Option 3: As options 1 and 2 but also advertise on commercial radio. For simplicity, the demand for tickets is categorized as low, medium or high. The payoff table below shows how the profit which the company will earn for each option depends on the level of demand. Option 1 2 3 Low - 20 - 60 - 100 Demand Profits ($000s) Medium High 20 100 - 20 60 - 60 20 (a) Find the maximin optimal act. (b) Find the minimax regret optimal act. (c) It is estimated that the probabilities of low, medium and high demand are 0.4, 0.5, and 0.1, respectively. Determine the option which will lead to the highest expected profit.