You are a member of a 9-person committee (so it\'s you and another 8 people in t
ID: 1118952 • Letter: Y
Question
You are a member of a 9-person committee (so it's you and another 8 people in this committee) The committee must decide next year's policy, which can be to either keep this year's policy (status quo, or SQ) or choose a new policy, N. Each member casts a secret vote, and then the outcome that is chosen by a majority of the people is chosen as the policy for next year (either SQ or N) Everyone knows that SQ would result in a certain payoff of S5 million. The payoff to N, however, is uncertain. But each member of the committee has a team of advisors that wrote a report with a final recommendation, (yes) or fno), where {yes} means that the advisors to that committee person believe N to be better than SQ, while [no suggests otherwise. For a diverse set of reasons, members of this committee cannot make these reports available to the other members. That is, you can only see your own report. But you do know that the more {yes) in the reports, the higher the expected value of N. In fact, your experience suggests the following relationship between the number of reports with a {yes) and the expected payoff from choosing the new alternative N: # of yes} signals 0 123 45 6789 expected value of N (millions of S) -15 -10 -5 2 3 6 7 8 9 10 2 Your past experience in these committees also suggests that other people always vote what their report tells them. So if the report of another member indicates [yes), then that member votes for N; and if the report indicates {noj, then that member votes for SQ Your advisors come back to you with a report that recommends {yes). Should you vote for N or for SQ?Explanation / Answer
You should go for N as even if the majority out of 9 people i.e. 5, vote for N; the expected payoff is $6 million which is greater than the quoted value of SQ's expected payoff of $5 million.
Moreover, the advisors clearly suggest a {yes} for the new policy.
Hence the obvious choice should be a {yes} or to go with the new policy.
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