Question: Problem 13-27 (Algorithmic) In a certain state lottery, a lottery ticket costs $5. In terms of the decision to purchase or not to purchase a

Problem 13-27 (Algorithmic) In a certain state

Problem 13-27 (Algorithmic) In a certain state lottery, a lottery ticket costs $5. In terms of the decision to purchase or not to purchase a lottery ticket, suppose that the following payoff table applies: State of Nature Win Lose Decision Alternative S1 S2 400000 -5 Purchase Lottery Ticket, di Do Not Purchase Lottery Ticket, d2 0 0 a. A realistic estimate of the chances of winning is 1 in 210,000. Use the expected value approach to recommend a decision. If required, round your answer to two decimal places. Recommended decision: Expected Value = $ b. If a particular decision maker assigns an indifference probability of 0.00001 to the $0 payoff, suppose that the following payoff table applies: State of Nature Win Lose S1 S2 Decision Alternative Purchase Lottery Ticket, di Do Not Purchase Lottery Ticket, d2 10 0 0.00001 0.00001 Would this individual purchase a lottery ticket? Decision: Use expected utility to justify your answer. If required, round your answer to five decimal places. Expected Utility = The input in the box below will not be graded, but may be reviewed and considered by your instructor

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