For the following payoff table, the decision maker will use P(s₁) = 0.25, P(s₂) = 0.45, and P(s₃) = 0.30.

	State of Nature
Decision	s1	s2	s3
d1	15,000	2,000	40,000
d2	5,000	1,000	10,000

(a)

What alternative would be chosen according to expected value? (Assume the decision maker wants to maximize the expected value.) d1 or d2?

For a lottery having a payoff of 40,000 with probability p and 15,000 with probability

(1 p),

the decision maker expressed the indifference probabilities shown in the following table.

Payoff	Probability
10,000	0.85
1,000	0.60
2,000	0.53
5,000	0.50

Let U(40,000) = 10 and U(15,000) = 0 and find the utility value for each payoff.

Payoff	Probability
10,000
1,000
2,000
5,000

(c)

What alternative would be chosen according to expected utility?

d_{1 or} d₂ ?