You are choosing among three investment plans. The payoffs of these investment plans depends on next year's GDP (see the table below.) You believe that next year's GDP will decrease with a probability of 0.3, level with a probability of 0.2, and increases with a probability of 0.5.
Which alternative should be chosen based on the maximin criterion? Plan 1, Plan 2, Plan 3, or not enough information.
|
GDP decreases |
GDP levels |
GDP increases |
| Plan 1 |
$10,000 |
$12,000 |
$13,000 |
| Plan 2 |
$7,000 |
$15,000 |
$15,500 |
| Plan 3 |
$11,000 |
$11,000 |
$11,500 |