1. Throughout the chapter we have assessed individual utility functions that range from 0 to 1. What is the advantage of doing this?
2. You are an up-and-coming developer in downtown Seattle and are interested in constructing a building on a site that you own. You have collected four bids from prospective contractors. The bids include both a cost (millions of dollars) and a time to completion (months):
|
Contractor A
|
Cost 100
|
Time 20
|
|
B
|
80
|
25
|
|
C
|
79
|
28
|
|
D
|
82
|
26
|
The problem now is to decide which contractor to choose. B has indicated that for an- other $20 million he could do the job in 18 months, and you have said that you would be indifferent between that and the original proposal. In talking with C, you have indicated that you would just as soon pay her an extra $4 million if she could get the job done in 26 months. Who gets the job? Explain your reasoning. (It may be convenient to plot the four alternatives on a graph.)