The Decision Maker Now Has $15,000 and Two Possible Decisions

question 105

Essay

The decision maker now has $15,000 and two possible decisions. For decision 1, she loses $1,000 for certain. For decision 2, she loses $0 with probability 0.9 and loses $4,000 with probability 0.10. Which decision maximizes the expected utility of her net wealth?

---

Definitions:

Familiarity

The quality of being well known or easily recognized, often resulting from being encountered frequently or studied extensively.

Perceptual Selection

The process by which individuals filter and select environmental stimuli to pay attention to, based on various factors such as interests, background, and expectations.

Perceptual Selection

The process by which individuals filter and select information from their environment based on their preferences, beliefs, and past experiences.

Hand Gestures

Movements of the hands and arms used to convey messages or express emotions nonverbally.