Question: A decision maker (DM) has to make a decision a without knowing the underlying state . Suppose the DM has preference u(a ) = (a

A decision maker (DM) has to make a decision a without knowing the underlying state . Suppose the DM has preference u(a ) = (a )2, and her prior belief is that follows a normal distribution with mean 0 and variance 2. The DM receives a signal s = + about , where is normally distributed with mean 0 and variance 2. 1. What is DMs optimal decision a when receiving a signal s

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