Mini-Max Regret Criterion

This decision criteria has an objective of minimizing the maximum regret which can occur as a result of choosing a certain option and not the others.

This approach uses this formula;

Opportunity Loss (OL) = Maximum Payoff – Payoff under Each condition occurrence

The following steps are adhered to when determining the best alternative

Step one;

Identify the maximum payoff in each condition

Step two;

Subtract each payoff from the maximum payoff to determine the net amount

NB: Step two should be repeated for all categories of the conditions given

Step three;

Select the minimum value since it minimizes the maximum regret

Example

The sales manager is looking up to select the best price his company can use to sell its products.

So the decision to be made will be determined by Mini-Max Regret Criterion. Such that if given the following pay-off matrix;

Required, using Mini-Max Regret Criterion, show the correct alternative.

Solution

Price 10.30 is the alternative to go by for it minimizes the maximum regret