Kevin is risk-averse and lives in Seattle. He purchases 100 new Magic: The Gathe
ID: 3126933 • Letter: K
Question
Kevin is risk-averse and lives in Seattle. He purchases 100 new Magic: The Gathering cards, and now he must bring them home. Although making the trips home is costless, even when the sky is clear, there is a 50% chance that, before he gets home, it will rain and destroy all the cards that he is taking with him. Kevin considers two strategies: Strategy 1: Take all 100 cards in one trip Strategy 2: Take two trips with 50 in each trip a. List the possible outcomes of each strategy and the probabilities of these outcomes. Show that on average, 50 cards will remain after the trip home under either strategy. b. Develop a graph to show the utility obtainable under each strategy. Which strategy will be preferable? c. Could utility be improved further by taking more than two trips? How would this possibility be affected if additional trips were costly?Explanation / Answer
the strategies 1 and 2 are best possibilities.
in strategy 1 if he carries all 100 cards there is a 100 percent probaility that he carries all cards or without any card is 1 /2. As the cards depend on rain as it is 50 - 50 chance of raining in travel.
in strategy 2 if he carries 50 cards at a time he lost in 1 case and in 2 case he carry remaining 50 cards to home definitely.as raining chances are 50 - 50 .the probability is 1/2.
second strategy is preferable as he can carry 50 cards without destruction.
first strategy is a luck where he can lose all r carry all with him.
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