Return on Software: Maximizing the Return on Your Software Investment

The Maximin Rule

The Maximin rule is the most pessimistic of the uncertainty techniques. Maximin assumes that the worst state of nature will happen, so you should pick the alternative that has the best payoff from all of the worst payoffs. The formula for the Maximin rule is as follows:

Under Maximin, find the worst payoff for each alternative. This is shown in Table 25.4.

Table 25.4. Worst Payoffs for the Maximin Rule (in $1000s)

Alternative	Worse Economy	Same Economy	Better Economy	Worst Payoff
A1	0	4000	2500	0
A2	1000	500	4000	500
A3	–2500	1500	6000	–2500
A4	0	1000	5000	0

Choose the alternative with the best of the worst payoffs. In the example, alternative A2 has ...