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What is your decision using the maximax approach

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Reference no: EM131735241

Question - Joe is thinking about investing in the stock market. The payoff table is below.

Strong market

Fair market

Poor market

invest $8000

$800

$200

-$400

invest $4000

$400

$100

-$200

invest $2000

$200

$50

-$100

invest $1000

$100

$25

-$50

a) What is your decision using the maximax approach?

b) What is your decision using the maximin approach?

c) What is your decision using the equally likely approach?

d) If the stock market has a 0.1 probability of being strong and a 0.5 probability of being fair, does your decision change?

e) How much would you be willing to pay for an economic study predicting the behavior of the market?

Reference no: EM131735241

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