College senior must choose between two alternatives

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Reference no: EM13844888

A college senior must choose between two alternatives: going for an MBA or taking a full-time entry position right after graduation. She thinks that she has 0.7 probability of completing the MBA. In a year If she completes the MBA, she believes that she has 0.6 probability of getting a manager position; otherwise, she will get a senior staff position. Should she fails the MBA, she will have to take the entry position but with less seniority than what she would have if she had gone to work right after graduation. Once started at the entry position for a year, she believes that she has a 50-50 chance of moving up to a junior staff position versus staying at the entry position. Her preferences for the possible outcomes of her choice at the end of two years are listed in decreasing order below: (1) Completing the MBA and get a management position (2) Completing the MBA and get a senior staff position (3) Moving from entry position to staff without going to MBA and thus more seniority (4) Moving from entry position to staff after not being able to complete the MBA (5) Staying at entry position without going to MBA and thus having more seniority (6) Staying at entry position after not being able to complete the MBA Through self-questioning, she has found that she would be indifferent between: Outcome (2) and a lottery with a 50-50 chance of yielding the best outcome (1) and the worst outcome (6). Outcome (3) and the lottery if the lottery has a 0.4 probability yielding (1). Outcome (4) and the lottery if the lottery has a 0.2 probability yielding (1). Outcome (5) and the lottery if the lottery has a 0.1 probability yielding (1). With a utility 0 for (6) and 100 for (1), find her best alternative for a two-year period.

Reference no: EM13844888

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