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?

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