1. An analyst is assessing a DM's utility function for profit Y, in dollars, ranging from -400,000 to 2,000,000, and wishes to use a function:

() = ( ^+400,000) , -400,000 < y < 2,000,000

2,400,000

She determined that the DM is indifferent between Alternative A and Alternative B:

Alternative A: Probability 0.5of making profit $2,000,000

Probability 0.5of making profit -$400,000

Alternative B: Probability 1.0of making profit of $800,000

1. What would you use for the DM's utility function? Show your work.

1. Why could you use Expected Value when analyzing problems involving profit for this DM?