How is a utility curve used in selecting the best decision

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Question: 1. How is a utility curve used in selecting the best decision for a particular problem?

2. What is a risk seeker? What is a risk avoider? How do the utility curves for these types of decision makers differ?

3. In the environment of increased competition, a fitness club executive is considering the purchase of additional equipment. His alternatives, outcomes, and payoffs (profits) are shown in the following table:

819_Equipment.png

(a) If the executive is an optimistic decision maker, which alternative will he likely choose?

(b) If the executive is a pessimistic decision maker, which alternative will he likely choose?

(c) Market research suggests the chance of a favorable market for fitness clubs is 76%. If the executive uses this analysis, which alternative will he likely choose?

Reference no: EM131929623

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