1.      Figure 3.5 is complete decision tree for John Thompson. After completing the analysis John is not sure about the risk. After going through a number of standard gambles, John was able to assess his utility for money. Here are some of the utility assessments:

U(-$190,000)= 0,

U(-$180,000)= 0.05,

U(-$30,000)= 0.10,

U(-$20,000)= 0.15,

U(-$10,000)= 0.20,

U($0)= 0.30,

U($90,000)= 0.50,

U($100,000)= 0.60,

U($190,000)= 0.95,

U($200,000)= 1.00.

If John maximizes his expected utility, does his decision change?

 

 

    • 10 years ago
    Decision Theory_ Expected Utility
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