In this chapter a decision tree was developed for John Thompson. After completin

Question

In this chapter a decision tree was developed for John Thompson. After completing the analysis, John was not completely sure that he is indifferent to 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) = 02, U($0) = 0.3, U($90,000) = 0.5, and U($100,000) = 0.6, U($190,000) = 0.95 and U($200,000) = 1.0 If John maximizes his expected utility, does his decision change? In this chapter a decision tree was developed for John Thompson. After completing the analysis, John was not completely sure that he is indifferent to 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) = 02, U($0) = 0.3, U($90,000) = 0.5, and U($100,000) = 0.6, U($190,000) = 0.95 and U($200,000) = 1.0 If John maximizes his expected utility, does his decision change?

Explanation / Answer

Expected utility = 468,500

on maximizing his expected utility, his decisiondoesn't change

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