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Jodi wants to lease a new car and start a part time business to give people car rides. She has contacted three automobile dealers for pricing information. Each dealer offered Jodi a closed-end 36-month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The three dealers provided the details about the monthly lease cost, the mileage allowance, and the cost for additional miles.
Jodi is not sure how many miles she will drive over the next three years for this business but she believes it is reasonable to assume that she will drive 10,000 miles per year, 15,000 miles per year, or 20,000 miles per year. With this assumption, Jodi estimated her total profit for the three lease options. The three lease options and the associated profits for each option are given below:
Dealer 10000 Miles 15000 Miles 20000 Miles
A $10000 $10000 $ 8000
B $ 7500 $11000 $10500
C $ 8500 $ 9000 $ 8800
Determine the optimal decision to lease the car from a dealer and the profit associated with it by using the following decision criteria.
a. Maximax
b. Maximin
c. Equal likelihood
d. Minimax regret criterion.
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