(PLEASE BE SURE TO CLEARLY INDICATE FINAL ANSWERS!)

(PLEASE SHOW YOUR WORK!)

Problem 1 (8 points):

A group of friends are planning a recreational outing and have constructed the following payoff table to help them decide which activity to engage in. Assume that the payoffs represent their level of enjoyment for each activity under the various weather conditions.

Weather

Cold Warm Rainy

S1 S2 S3

Bike: A1 10 8 6

Hike: A2 14 15 2

Fish: A3 7 8 9

If the probabilities of cold weather (S1), warm weather (S2), and rainy weather (S3) are 0.3, 0.3, and 0.4, respectively, then what decision should be made using the expected value criterion?