Question: Problem 2 : Rank Dependent Utility ( R e f e r t o Slides 1 3 - 1 9 i n Module 1 2

Problem 2: Rank Dependent Utility (Referto Slides 13-19in Module 12)(6 points)
Consider the following decision between two alternatives a' and a''.
The decision maker's utilities for the outcomes are as follows:
u(x1)=1.0,u(x2)=0.7,u(x3)=0.5,u(x4)=0.25,u(x5)=0.15,u(x6)=0.05
Assume that the decision maker follows Rank Dependent Utility (RDU) with w(R)=R2. Calculate the
Rank Dependent Utility (RDU) for the two alternatives. Which alternative will the decision maker choose?
Is the decision consistent with what you obtained using the expected utility theory?
Problem 2 : Rank Dependent Utility ( R e f e r t

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