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For the payoff table below, the decision maker will use P(s1)=.15, P(s2)=.5, and P(s3)=.35
a. What alternative would be chosen according to expected value?
b. For a lottery having a payoff of 40,000 with probability p and -15,000 with probability (1-p), the decision maker expressed the following indifference probabilities
Payoff Probability10,000 .851000 .60-2000 .53-5000 .50
Let U(40,000)=10 and U(-15,000)=0 and find the utility value for each payoff.
c. What alternative would be chosen according to expected utility?
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