For the payoff table below,the decision maker will use P(s₁)= .15,P(s₂)= .5,and P(s₃)= .35. $\begin{array} { c | r c c } && { \text { State of Nature } } \\\text { Decision } & { s _ { 1 } } & s _ { 2 } & s _ { 3 } \\\hline d _ { 1 } & - 5000 & 1000 & 10,000 \\d _ { 2 } & - 15,000 & - 2000 & 40,000\end{array}$
a.What alternative would be chosen according to expected value?
b.For a lottery having a payoff of 40,000 with probability p and 15,000 with probability (1  p), the decision maker expressed the following indifference probabilities. $\begin{array} { r c } \text { Payoff } & \text { Probability } \\\hline 10,000 & .85 \\1000 & .60 \\- 2000 & .53 \\- 5000 & .50\end{array}$ Let U(40,000) = 10 and U(15,000) = 0 and find the utility value for each payoff.
c.What alternative would be chosen according to expected utility?

Question

For the payoff table below,the decision maker will use P(s₁)= .15,P(s₂)= .5,and P(s₃)= .35.

\begin{array} { c | r c c } && { \text { State of Nature } } \\\text { Decision } & { s _ { 1 } } & s _ { 2 } & s _ { 3 } \\\hline d _ { 1 } & - 5000 & 1000 & 10,000 \\d _ { 2 } & - 15,000 & - 2000 & 40,000\end{array}

a.What alternative would be chosen according to expected value?
b.For a lottery having a payoff of 40,000 with probability p and 15,000 with probability (1  p), the decision maker expressed the following indifference probabilities.

\begin{array} { r c } \text { Payoff } & \text { Probability } \\\hline 10,000 & .85 \\1000 & .60 \\- 2000 & .53 \\- 5000 & .50\end{array}

Let U(40,000) = 10 and U(15,000) = 0 and find the utility value for each payoff.
c.What alternative would be chosen according to expected utility?

Quizplus · Accepted Answer

The Answer of For the payoff table below,the decision maker will use P(s₁)= .15,P(s₂)= .5,and P(s₃)= .35. $$\begin{array} { c | r c c } && { \text { State of Nature } } \ \text { Decision } & { s _ { 1 } } & s _ { 2 } & s _ { 3 } \ \hline d _ { 1 } & - 5000 & 1000 & 10,000 \ d _ { 2 } & - 15,000 & - 2000 & 40,000 \end{array}$$ a.What alternative would be chosen according to expected value? b.For a lottery having a payoff of 40,000 with probability p and  15,000 with probability (1  p), the decision maker expressed the following indifference probabilities. $$\begin{array} { r c } \text { Payoff } & \text { Probability } \ \hline 10,000 & .85 \ 1000 & .60 \ - 2000 & .53 \ - 5000 & .50 \end{array}$$ Let U(40,000) = 10 and U(  15,000) = 0 and find the utility value for each payoff. c.What alternative would be chosen according to expected utility?

For the Payoff Table Below,the Decision Maker Will Use P(s1)=

For the Payoff Table Below,the Decision Maker Will Use P(s₁)=