Consider the Thompson Lumber EMV decision from Table 8.8. Suppose that the utility function for Thompson Lumber
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Consider the Thompson Lumber EMV decision from Table 8.8. Suppose that the utility function for Thompson Lumber can be expressed as 1 – 1.2 – [(X + 120,000) / 30,000] for monetary value X.
(a) Compute the expected utility of each decision for Thompson Lumber.
(b) Which choice maximizes expected utility?
Table 8.8
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Managerial Decision Modeling Business Analytics With Spreadsheet
ISBN: 9781501515101
4th Edition
Authors: Nagraj Balakrishnan, Barry Render, Ralph Stair, Charles Munson
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