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?

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?

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Question

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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