A warehouse of finished products that leases its services to imports from the USA,

must plan its level of supply to satisfy the demand of its customers in the day of
love and friendship. The exact number of crates is not known but is expected to fall
into one of five categories: 580, 720, 750, 790 and 830 crates. There are therefore
four levels of supply. The deviation from the number of hoppers is expected to
result in additional costs, either due to excessive supplies or because demand
cannot be met. The table below shows the costs in hundreds of dollars (US $). For
Hurwicz please assume an alpha of 0,55.

Event
e1(580) e2(720) e3(750) e4(790) e5(830)
Alternative
e1(580) 1144 982 1019 1032 1069
e2(720) 1175 1019 857 1019 1057
e3(750) 1069 1138 1044 1094 1182
e4(790) 1019 932 1200 1032 932
e5(830) 1007 1032 894 1188 1200
Table 3. Cost matrix 1

According to Table 3 by applying the criteria of criteria of Laplace, Wald or

pessimistic, optimistic, Hurwicz and Savage determine the optimal decision level
according to the criteria of costs.

a. Hurwicz criterion

Optimistic Hurwicz criterion – pessimistic

It is an intermediate criterion between Wald's criterion and the optimistic criterion.
For apply this decision criterion, the decision maker must define its coefficient of
optimism α between 0 and 1. Consequently, the coefficient of pessimism will be
given (1-α) α=0,55

Event Worst Expected

e1(580) e2(720) e3(750) e4(790) e5(830) best result
Alternative result value

e1(580) 1144 982 1019 1032 1069 982 1144 1071,1

 1031,9
e2(720) 1175 1019 857 1019 1057 857 1175
1119,9
e3(750) 1069 1138 1044 1094 1182 1044 1182
1079,4
e4(790) 1019 932 1200 1032 932 932 1200
1062,3
e5(830) 1007 1032 894 1188 1200 894 1200
Table 3. Cost matrix 2

The optimal decision level by the Hurwicz criterion is e2 (720) with a result of
1031,9

b. Criteria of Savage (opportunity cost)

 Form the matrix of regrets or opportunity cost.

 Once the matrix of loss of opportunity is formed, Savage advises
choosing the strategy that corresponds to the minimum of the maximum
regrets.

Event
e1(580) e2(720) e3(750) e4(790) e5(830)
Alternative

e1(580) 1144 982 1019 1032 1069

e2(720) 1175 1019 857 1019 1057
e3(750) 1069 1138 1044 1094 1182
e4(790) 1019 932 1200 1032 932
e5(830) 1007 1032 894 1188 1200
Table 3. Cost matrix 3

opportunity cost matrix

Event 1007 932 857 1019 932

Alternative e1(580) e2(720) e3(750) e4(790) e5(830) VM
(1007-1144) (932-982) (857-1019) (1019-1032) (932-1069)
e1(580) -13
-137 50 -162 -13 -137
(1007-1175) (932-1019) (857-857) (1019-1019) (932-1057)
e2(720) -87
-168 -87 0 0 -125
(1007-1069) (932-1138) (857-1044) (1019-1094) (932-1182)
e3(750) -62
-62 -206 -187 -75 -250
e4(790) (1007-1019) (932-932) (857-1200) (1019-1032) (932-932) -12
 -12 0 -343 -13 0
(1007-1007) (938-1032) (857-894) (1019-1188) (932-1200)
e5(830) -37
0 -100 -37 -169 -268
Table 3. Cost matrix 4

From the matrix, the largest opportunity costs are chosen by rows, and of these the
smallest, in summary, of the maximums, the minimum is chosen. Therefore,
following this criterion, the chosen value would be the alternative e4 (790) since it
is -12.