Return on Software: Maximizing the Return on Your Software Investment

The Maximax Rule

In contrast with Maximin, the Maximax rule is the most optimistic of the techniques. Maximax assumes that the best state of nature will happen, so you should pick the alternative that has the best payoff among all of the best payoffs. The formula for the Maximax rule is as follows:

Under Maximax, find the best payoff for each alternative. This is shown in Table 25.5.

Table 25.5. Best Payoffs for the Maximax Rule (in $1000s)

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

Choose the alternative with the best of the best payoffs. In the example, alternative ...