Question: A firm has three investment alternatives. Payoffs are in thousands of dollars.
a. Using the expected value approach, which decision is preferred?
b. For the lottery having a payoff of $100,000 with probability p and $0 with probability (12 p), two decision makers expressed the following indifference probabilities. Find the most preferred decision for each decision maker using the expected utility approach.
c. Why don't decision makers A and B select the same decision alternative?