A. A product which was certain to weigh 130 grams, but which had a guaranteed lifetime of only 1 year. B.A gamble which offered a 0.7 probability of a product with a weight of 130 grams and a guaranteed lifetime of 3 years and a 0.3 probability of a product with a weight of 290 grams and a guaranteed lifetime of 1 year.Finally, the team leader said that he would be indifferent between alternatives C and D below. C.A product which was certain to weigh 290 grams, but which had a guaranteed lifetime of 3 years. D.A gamble which offered a 0.9 probability of a product with a weight of 130 grams and a guaranteed lifetime of 3 years and a 0.1 probability of a product with a weight of 290 grams and a guaranteed lifetime of 1 year.   Question: What do the team leader's repsonses indicate about his attitude to risk and the relative weight which he attcahes to the two attributes of the proposed design?

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...
icon
Related questions
Question
100%

A. A product which was certain to weigh 130 grams, but which had a guaranteed lifetime of only 1 year.

B.A gamble which offered a 0.7 probability of a product with a weight of 130 grams and a guaranteed lifetime of 3 years and a 0.3 probability of a product with a weight of 290 grams and a guaranteed lifetime of 1 year.Finally, the team leader said that he would be indifferent between alternatives C and D below.

C.A product which was certain to weigh 290 grams, but which had a guaranteed lifetime of 3 years.

D.A gamble which offered a 0.9 probability of a product with a weight of 130 grams and a guaranteed lifetime of 3 years and a 0.1 probability of a product with a weight of 290 grams and a guaranteed lifetime of 1 year.

 

Question: What do the team leader's repsonses indicate about his attitude to risk and the relative weight which he attcahes to the two attributes of the proposed design?

The leader of Lightning's research and development team has estimated that if the plastic design is
developed there is a 60% chance that the resulting system would add 130 grams to a bicycle's weight
and would have a guaranteed lifetime of 1 year. He also reckons that there is a 40% chance that a
product with a 2-year lifetime could be developed, but this would weigh 180 grams.
Alternatively, if the metal design was developed the team leader estimates that there is a 70% chance
that a product with a 2-year guaranteed life and weighing 250 grams could be developed. However, he
estimates that there is a 30% chance that the resulting product would have a guaranteed lifetime of 3
years and would weigh 290 grams.
It was established that, for the team leader, weight and guaranteed lifetime were mutually utility
independent. The following utilities were then elicited from him:
Weight (grams)
130
180
250
290
Utility
1.0
0.9
0.6
0
Guaranteed lifetime
(years)
3
2
1
Utility
1.0
0.6
0
After further questioning the team leader indicated that he would be indifferent between the
falle
Transcribed Image Text:The leader of Lightning's research and development team has estimated that if the plastic design is developed there is a 60% chance that the resulting system would add 130 grams to a bicycle's weight and would have a guaranteed lifetime of 1 year. He also reckons that there is a 40% chance that a product with a 2-year lifetime could be developed, but this would weigh 180 grams. Alternatively, if the metal design was developed the team leader estimates that there is a 70% chance that a product with a 2-year guaranteed life and weighing 250 grams could be developed. However, he estimates that there is a 30% chance that the resulting product would have a guaranteed lifetime of 3 years and would weigh 290 grams. It was established that, for the team leader, weight and guaranteed lifetime were mutually utility independent. The following utilities were then elicited from him: Weight (grams) 130 180 250 290 Utility 1.0 0.9 0.6 0 Guaranteed lifetime (years) 3 2 1 Utility 1.0 0.6 0 After further questioning the team leader indicated that he would be indifferent between the falle
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
Recommended textbooks for you
A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
Probability
ISBN:
9780134753119
Author:
Sheldon Ross
Publisher:
PEARSON
A First Course in Probability
A First Course in Probability
Probability
ISBN:
9780321794772
Author:
Sheldon Ross
Publisher:
PEARSON