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[See Solution] Consider a firm that is deciding whether to operate plants only in the United States or also in either Mexico or Canada or both. Congress is

Question: Consider a firm that is deciding whether to operate plants only in the United States or also in either Mexico or Canada or both. Congress is currently discussing an overseas investment in new capital (OlNC) tax credit for US. firms that operate plants outside the country. If Congress passes OINC in 2005, management expects to do well if it is operating plants in Mexico and Canada. If OINC does not pass in 2005 and the firm does Operate plants in Mexico and Canada, it will incur rather large losses. It is also possible that Congress will table OlNC in 2006 and wait until 2003 to vote on it. The profit payoff matrix (profits in 2005) is shown here:

Decision OINC passes OINC fails OINC stalls
Operate plants in US only 10 -1 2
Operate plants in US and Mexico 15 -4 1.5
Operate plants in US, Mexico and Canada 20 -6 4

Assuming the managers of this firm have no idea about the likelihood of congressional action on OINC in 2005, what decision should the firm make using each of the following rules?

  1. Maximax rule
  2. Maximin rule
  3. Minimax regret rule d. Equal probability rule
    Price: $2.99
    Solution: The downloadable solution consists of 3 pages
    Deliverable: Word Document


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