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In a certain state lottery, a lottery ticket costs $1. In terms of the decision to...

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Basic Math

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

State of Nature
WinLose
Decision Alternativess1s2
Purchase Lottery Ticket, d1600000-1
Do Not Purchase Lottery Ticket, d200
  1. A realistic estimate of the chances of winning is 1 in 260,000.Use the expected value approach to recommend a decision. Ifrequired, round your answer to two decimal places. If the amount iszero enter “0”.

    Recommended decision: Purchase Lottery Ticket  

    Expected Value = $  
  2. If a particular decision maker assigns an indifferenceprobability of 0.00001 to the $0 payoff. Would this individualpurchase a lottery ticket?

    Decision: Yes, Purchase Lottery Ticket  

    Use expected utility to justify your answer. If required, roundyour answer to five decimal places.

    Expected Utility =  

    The input in the box below will not be graded, but may be reviewedand considered by your instructor.

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