ESSEN OF BUSINESS ANALYTICS (LL)  BOM
ESSEN OF BUSINESS ANALYTICS (LL) BOM
2nd Edition
ISBN: 9781337128629
Author: Camm
Publisher: CENGAGE L
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Chapter 15, Problem 21P

In a certain state lottery, a lottery ticket costs $2. In terms of the decision to purchase or not to purchase a lottery ticket, suppose that the following payoff table applies:

Chapter 15, Problem 21P, In a certain state lottery, a lottery ticket costs 2. In terms of the decision to purchase or not to

  1. a. A realistic estimate of the chances of winning is 1 in 250,000. Use the expected value approach to recommend a decision.
  2. b. If a particular decision maker assigns an indifference probability of 0.000001 to the $0 payoff, would this individual purchase a lottery ticket? Use expected utility to justify your answer.
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