You are given the following payoff table. a. Assume that your utility function for the payoffs is
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a. Assume that your utility function for the payoffs is U(x) (x. Plot the expected utility of each decision alternative versus the value of p on the same graph. For each decision alternative, find the range of values of p over which this alternative maximizes the expected utility.
b. Now assume that your utility function is the exponential utility function with a risk tolerance of R = 50. Use RSPE to construct and solve the resulting decision tree in turn for p = 0.25, p 5 0.5, and p = 0.75.
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Introduction to Management Science A Modeling and Cases Studies Approach with Spreadsheets
ISBN: 978-0078024061
5th edition
Authors: Frederick S. Hillier, Mark S. Hillier
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