s
-Consider Figure 13.1, which represents an optimistic state of nature and Figure 13.2, which represents a pessimistic state of nature. Suppose that there is a 10 percent probability of an optimistic state of nature and a 90 percent probability of a pessimistic state of nature will prevail. The actual payoffs to both players in this game are:
I. (70, 70).
II. (80, 80).
III. (90, 90).
IV. (100, 100).
Which of the following is the correct answer?
A) I or II.
B) II or III.
C) III or IV.
D) I or III.
E) I or IV.

Question

s
-Consider Figure 13.1, which represents an optimistic state of nature and Figure 13.2, which represents a pessimistic state of nature. Suppose that there is a 10 percent probability of an optimistic state of nature and a 90 percent probability of a pessimistic state of nature will prevail. The actual payoffs to both players in this game are:
I. (70, 70).
II. (80, 80).
III. (90, 90).
IV. (100, 100).
Which of the following is the correct answer?
A) I or II. 
B) II or III. 
C) III or IV. 
D) I or III. 
E) I or IV.

Quizplus · Accepted Answer

Given the probabilities, the expected payoff is calculated by weighing the optimistic and pessimistic outcomes. The optimistic state (higher payoffs) is less likely, so the higher payoffs (III or IV) are more probable in this context.

S -Consider Figure 13.1, Which Represents an Optimistic State of Nature