A decision maker using an exponential utility function would prefer a random payoff with an expected value of X to a certain payoff of X. True False 2) In a decision tree, a circular node indicates a point where a random event occurs. True False 3) The optimistic and conservative approaches to decision making will always give the same result. True False
1) A decision maker using an exponential utility function would prefer a random payoff with an expected value of X to a certain payoff of X.
True
False
2) In a decision tree, a circular node indicates a point where a random event occurs.
True
False
3) The optimistic and conservative approaches to decision making will always give the same result.
True
False
ANSWER 1: TRUE
EXPLANATION :
A decision maker who uses exponential utility function is risk-loving. Such the decision maker would favor random payoff with an expected value of X over a certain payoff of X because the random payoff has the potential to be higher than X, and the decision maker's preference for risk means they might want to accept a certain degree of potential loss for opportunity of higher payoff.
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