In a certain state lottery, a lottery ticket costs $2. In terms of the decision to...
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In a certain state lottery, a lottery ticket costs $2. In terms of the decision to purchase or not to purchase a lottery ticket, assume that the following payoff table applies. State of Nature Decision Alternatives Purchase lottery ticket, d1 Win $1 Loses $2 $2,050,000 -$2 Do not purchase lottery ticket, dz $0 $0 (a) A realistic estimate of the chances of winning is 1 in 2,000,000. Use the expected value approach to recommend a decision. If required, round your answers to two decimal places. For subtractive or negative number use a minus sign (Example: -300). If your answer is zero enter "0". EV(d1) = EV(d2) = -1.75 Recommended decision: d1 (b) If a particular decision maker assigns an indifference probability of 0.000001 to the $0 payoff, would this individual purchase a lottery ticket? Use expected utility to justify your answer. If required, round your answers to six decimal places. EU(d1) 0.000005 EU(d2) = Purchase a lotery ticket? No In a certain state lottery, a lottery ticket costs $2. In terms of the decision to purchase or not to purchase a lottery ticket, assume that the following payoff table applies. State of Nature Decision Alternatives Purchase lottery ticket, d1 Win $1 Loses $2 $2,050,000 -$2 Do not purchase lottery ticket, dz $0 $0 (a) A realistic estimate of the chances of winning is 1 in 2,000,000. Use the expected value approach to recommend a decision. If required, round your answers to two decimal places. For subtractive or negative number use a minus sign (Example: -300). If your answer is zero enter "0". EV(d1) = EV(d2) = -1.75 Recommended decision: d1 (b) If a particular decision maker assigns an indifference probability of 0.000001 to the $0 payoff, would this individual purchase a lottery ticket? Use expected utility to justify your answer. If required, round your answers to six decimal places. EU(d1) 0.000005 EU(d2) = Purchase a lotery ticket? No
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