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1. Show that it makes sense to make the same choices in X and Y by drawing decision trees. Y A: $2,000 0.5 B: $1,000 0.5 A: $2,000 0.2 B: $1,000 0.2 $4,000 0.5 $5,000 0.5 $4,000 0.2 $5,000 0.2 $6,000 0.6 $6,000 0.6 2. Consider the following two decision problems: Problem 1 Problem 2 A: $2,500 0.33 B: $2,400 1 C: $2,500 D: $2,400 0.33 0.34 $2,400 0.66 $0 0.67 $0 0.66 $0 0.01 (a) Which option (A or B) would you choose in Problem 1? (b) Which option (C or D) would you choose in Problem 2? (c) Are your choices consistent with expected utility model?

1. Show that it makes sense to make the same choices in X and Y by drawing decision trees. Y A: $2,000 0.5 B: $1,000 0.5 A: $2,000 0.2 B: $1,000 0.2 $4,000 0.5 $5,000 0.5 $4,000 0.2 $5,000 0.2 $6,000 0.6 $6,000 0.6 2. Consider the following two decision problems: Problem 1 Problem 2 A: $2,500 0.33 B: $2,400 1 C: $2,500 D: $2,400 0.33 0.34 $2,400 0.66 $0 0.67 $0 0.66 $0 0.01 (a) Which option (A or B) would you choose in Problem 1? (b) Which option (C or D) would you choose in Problem 2? (c) Are your choices consistent with expected utility model?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter13: Regression And Forecasting Models
Section13.4: Multiple Regression Models
Problem 12P
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1. Show that it makes sense to make the same choices in X and Y by drawing decision trees. Y A: $2,000 0.5 B: $1,000 0.5 A: $2,000 0.2 B: $1,000 0.2 $4,000 0.5 $5,000 0.5 $4,000 0.2 $5,000 0.2 $6,000 0.6 $6,000 0.6 2. Consider the following two decision problems: Problem 1 Problem 2 A: $2,500 0.33 B: $2,400 1 C: $2,500 0.33 D: $2,400 0.34 $2,400 0.66 $0 0.67 $0 0.66 $0 0.01 (a) Which option (A or B) would you choose in Problem 1? (b) Which option (C or D) would you choose in Problem 2? (c) Are your choices consistent with expected utility model?
Transcribed Image Text:1. Show that it makes sense to make the same choices in X and Y by drawing decision trees. Y A: $2,000 0.5 B: $1,000 0.5 A: $2,000 0.2 B: $1,000 0.2 $4,000 0.5 $5,000 0.5 $4,000 0.2 $5,000 0.2 $6,000 0.6 $6,000 0.6 2. Consider the following two decision problems: Problem 1 Problem 2 A: $2,500 0.33 B: $2,400 1 C: $2,500 0.33 D: $2,400 0.34 $2,400 0.66 $0 0.67 $0 0.66 $0 0.01 (a) Which option (A or B) would you choose in Problem 1? (b) Which option (C or D) would you choose in Problem 2? (c) Are your choices consistent with expected utility model?
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