A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent
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Question:
A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45.
Alternative 1: Receive $82,000 with certainty
Alternative 2: Receive $143,000 with probability p and lose $15,000 with probability (1 - p).
(a) What is the expected value of Alternative 2 for this decision maker?
(b) What is the decision maker's certainty equivalent for this problem?
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
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