Maximizing Expected Utility and Decision Trees

As explained in this week's resources, maximization of expected utility involves the following five steps of decision making:

1-Identifying future conditions, along with the likelihood of the condition being realized

2-Listing possible alternatives

3-Estimating the payoff or utility for each alternative under each future condition

4-Calculating the expected utility

5-Selecting the best alternative

Decision trees can be used to illustrate all of this information in a graphic manner.

In this Assignment, apply the information from this week's resources to solve decision problems and complete a Decision Analysis for those problems. Solve problems 5, 10, and 11 on pp. 231-234 of the Stevenson text by creating decision trees, determining expected utilities of the decision alternatives, and offering recommended decisions based on the decision tree analysis.

Approximate length: 4-5 pages

Submit your Decision Analysis for the assigned problems

Hastie, R., & Dawes, R. M. (2010). Rational choice in an uncertain world (2nd ed.). Thousand Oaks, CA: Sage. Chapter 2, "What Is Decision Making?" (pp. 23-43)

Hastie, R., & Dawes, R. M. (2010). Rational choice in an uncertain world (2nd ed.). Thousand Oaks, CA: Sage. Chapter 11.1, "Formally Defining Rationality" (pp. 237-241)