Question: Please use Excel For the payoff table below, the decision maker will use P ( s 1 ) = .15, P ( s 2 )

Please use Excel

For the payoff table below, the decision maker will use P(s1) = .15, P(s2) = .5, and P(s3) = .35.

State of Nature

Decision

s1

s2

s3

d1

5000

1000

10,000

d2

15,000

2000

40,000

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.

What alternative would be chosen according to expected utility?

Please use excel

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