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 |
| Win | Lose |
| Decision Alternatives | s1 | s2 |
| Purchase Lottery Ticket, d1 | 600000 | -1 |
| Do Not Purchase Lottery Ticket, d2 | 0 | 0 |
- 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 Â
Expected Value = $Ă‚ Ă‚
- 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 Â
Use expected utility to justify your answer. If required, roundyour answer to five decimal places.
Expected Utility =Ă‚ Ă‚
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