Question: For the payoff table below, the decision maker will use P(s1) = .3, P(s2) = .4, and P(s3) = .3. State of Nature Decision s1

For the payoff table below, the decision maker will use P(s1) = .3, P(s2) = .4, and P(s3) = .3.

State of Nature

Decision

5000

1000 2000

10,000

15,000

40,000

What alternative would be chosen according to expected value?

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.

Probability

.85

d2 a.

Payoff 10,000

1000 .60 2000 .53 5000 .50

Let U (40,000) = 10 and U (15,000) = 0

Complete the utility table.

What alternative would be chosen according to expected utility?

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