Problem 13-27 (Algorithmic)

In a certain state lottery, a lottery ticket costs $1. In terms of the decision to purchase or not to purchase a lottery ticket, suppose that the following payoff table applies:

	State of Nature
	Win	Lose
Decision Alternatives	s1	s2
Purchase Lottery Ticket, d1	350000	-1
Do Not Purchase Lottery Ticket, d2	0	0

1. A realistic estimate of the chances of winning is 1 in 300,000. Use the expected value approach to recommend a decision. If required, round your answer to two decimal places. If the amount is zero enter 0. Recommended decision: Purchase Lottery Ticket Expected Value = $ _______
2. If a particular decision maker assigns an indifference probability of 0.00001 to the $0 payoff. Would this individual purchase a lottery ticket? Decision: Yes, Purchase Lottery Ticket Use expected utility to justify your answer. If required, round your answer to five decimal places. Expected Utility = ______