Question: In a certain state lottery, a lottery ticket costs $2. In terms of the decision to purchase or not to purchase a lottery ticket, suppose

In a certain state lottery, a lottery ticket costs $2. In terms of the decision to purchase or not to purchase a lottery ticket, suppose that the following payoff table applies:

a. A realistic estimate of the chances of winning is 1 in 250,000. Use the expected value approach to recommend a decision.
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 youranswer.

State of Nature Win s, 300,000 Decision Alternatives Loses s2 Purchase lottery ticket, di Do not purchase lottery ticket, d 2

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