A simple accounting/financial question... Minimax Regret

[LOLyourFace]

Could someone help me understand what minimax regret is?

On a given table, I believe it is subtracting the best payoff from the rest of the payoffs (and including itself) for each column. And with those new values, they're now Regret table. Now which payoff represents minimax regret?

Example:

Table
......................Good condition.......Bad condition..
Apartment.......$50,000..................$30,000
Office...............100,000....................-40,000
Warehouse.......30,000....................10,000

(periods are just spacers, disregard them)

Good condition
100,000-50,000=$50,000
100,000-100,000=$0
100,000-30,000=$70,000

Poor condition
30,000-30,000=$0
30,000-(-$40,000)=$70,000
30,000-20,000=$20,000

Now, from above six results, which is the minimax regret and WHY? I already know the answer but the text book answer and the explanation of minimax regret seem to contradict... The textbook explanation is p|ssing me off. Thank you.

 

[LOLyourFace]

will check back later after i study some more around this.

 

[LOLyourFace]

bump

 

[LOLyourFace]

ttt

 

[BrunoPuntzJones]

I've never heard of a minmax regret in accounting...nor in any of my finance classes. Is it also known as something else?

 

[Radiohead]

Minimax Regret is the action which minimizes the maximum regret. 😕

From the regret table you have, the max regret for each decision is:

Apartment: $50,000
Office: $70,000
Warehouse: $70,000

So the choice which minimizes the max regret, the minimax regret, is the Apartment as it is the lowest number

Hope I got that right 😉