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In our everyday life, we often have to make decisions with uncertain consequences. Assume that you are a hotel manager and you are considering
In our everyday life, we often have to make decisions with uncertain consequences. Assume that you are a hotel manager and you are considering four projects that yield different payoffs, depending upon whether there is an economic boom or a recession. The potential payoffs and corresponding payoffs are summarized in the following table. Project A B C D Boom (50%) Recession (50%) $20 -$10 $10 $20 $30 -$30 $50 $50 If a manager adopted both project A and B simultaneously, the expected value of this joint project would be: 8888 20. 30. 40. 10.
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