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

STATE OF NATURE

a. 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. Calculate the Expected Utility for all alternatives
d. what alternative would be chosen according to expected utility?

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Decision s1 S3 d1 5,000 1,000 10,000 d2 15,000 2,000 40,000