Applying Subjective Expected Utility Theory

Trip to a concert

Scenario

You won tickets to a concert in Omaha, Nebraska (Lets assume that you are really interested in seeing this bandyou need to indicate what band would you go to see in your assignment). You must decide how to get there. Use the SEU model to analyze your decision.

Plan of Action

Using a Word document, address Steps 1-5. You MUST construct a table to show your data and discuss your thought process for each step. This is a subjective model so the reader needs to understand your thoughts.

Step 1: List ALL feasible options. Be creative here. Goal: 4 options

Step 2: You need to enumerate all the possible consequences (outcomes) of each action. Goal: 4 outcomes

Step 3: Using a Likert scale of 1 to 10, decide the attractiveness, or utility of your consequences (outcomes).

Step 4: Evaluate the probability that the consequences of each option will actually occur. Again, using a Likert scale of one to ten, you can assess this probability. (This is a subjective measurethere is no probability formula to use for this stepSee Example #1 in Module 6 to help you with this step)

Step 5: Construct a table with your data, compute the expected utility or EU of each option, and choose the outcome with the greatest EU.

Step 5: Revisit the scenario, but utilize the satisficing approach. Establish and discuss your level of aspiration. Evaluate and discuss your optionsbe clear on the order in which you evaluated your options. The order will help determine the degree of which you utilized the satisficing approach (i.e. Did you only looked at two options and made a choice?)