A business owner is trying to decide whether to buy, rent, or lease office space in an environment where the states of nature describe business conditions as either brisk or slow. The payoffs to the buy decision, with brisk listed first are 90 and -10. Similarly for rent we have 70 and 40. Finally for lease the numbers are 60 and 55. If the probability of brisk business is .40 and for slow business is .60, and if the highest and lowest payoffs have utility 10 and 0, respectively, and if payoffs 70, 60, 55 and 40 have indifference probabilities .5, .4, .3, and .1, respectively, then which decision leads to the highest expected utility?

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Consider the expected payoffs with regard to each decision as follows The maximum of these e... View the full answer