The expected utility approach
A)does not require probabilities.
B)leads to the same decision as the expected value approach.
C)is most useful when excessively large or small payoffs are possible.
D)requires a decision tree.

Question

Quizplus · Accepted Answer

The expected utility approach is useful when excessively large or small payoffs are possible because it takes into account an individual's subjective preferences and risk aversion, unlike the expected value approach which only considers objective probabilities and payoffs. The expected utility approach also does not necessarily require probabilities or a decision tree. Therefore, option C is the best choice.

The Expected Utility Approach