# Jim has been employed at Gold Key Realty at a salary of $2,000 per month during the past year.... ## Question: Jim has been employed at Gold Key Realty at a salary of$2,000 per month during the past year. Because Jim is considered to be a top salesman, the manager of Gold Key is offering him one of three salary plans for the next year: (1) a 25% raise to $2,500 per month; (2) a base salary of$1,000 plus $600 per house sold; or, (3) a straight commission of$1,000 per house sold. Over the past year, Jim has sold up to 6 homes in a month.

a. Compute the monthly salary payoff table for Jim.

b. For this payoff table find Jim's optimal decision using: (1) the conservative approach, (2) minimax regret approach.

c. Suppose that during the past year the following is Jim's distribution of home sales. If one assumes that this a typical distribution for Jim's monthly sales, which salary plan should Jim select?

 Home Sales Number of Months 0 1 1 2 2 1 3 2 4 1 5 3 6 2

## Payoff table:

Payoff tables are used in the decision analysis, to represent the pros and cons of a decision in a tabular format. It reflects the payoffs (as an indicator of outcomes) associated with all possible combinations of actions or scenarios that may or may not be under the control of the decision-maker.

Payoff tables help the decision-maker to get the most preferable decision.

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a. Compute the monthly salary payoff table for Jim.

We calculate the monthly salary payoff table as:

...
 Number of Homes Sold 0