In making decisions under risk
A)maximizing expected value is always the best rule.
B)mean-variance analysis is always the best rule.
C)the coefficient of variation rule is always best.
D)maximizing expected value is best for making repeated decisions with identical probabilities.
E)none of the above

Question

Quizplus · Accepted Answer

Maximizing expected value is best for making repeated decisions with identical probabilities, because in such situations the expected value could be a good indicator of the long-term outcome. However, in situations where the probabilities or outcomes are not identical or if the decision-maker has a different risk preference, other decision rules such as mean-variance analysis or the coefficient of variation may be more appropriate. Therefore, option D is the best choice.

In Making Decisions Under Risk