6) For the payoff table below, the decision maker will use P(s1) = .15, P(s2) = .5, and P(s3) =.35. S1S2S3D1-5000100010,000D2-15,000-200040,000 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 withprobability (1-p), the decision maker expressed the following indifferenceprobabilities.Payoff Probability10,000 .851000 .60-2000 .53-5000 .50Let 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?

Probabilities of each strategy: P(s1) = 0.15, P(s2) = 0.5, and P(s3) =0.35 Payoff matrix: S1…

Answered: 6) For the payoff table below, the…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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

	S1	S2	S3
D1	-5000	1000	10,000
D2	-15,000	-2000	40,000

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.

Payoff                                   Probability
10,000                                    .85
1000                                        .60
-2000                                      .53
-5000                                      .50

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?

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