Rain No Rain Set up in Gym [$1400 $1400 Set up in Stadium -$940 $2000 Set up Bot

Question

Rain No Rain Set up in Gym [$1400 $1400 Set up in Stadium -$940 $2000 Set up Both $1080 $1760 What strategy should the organizer choose if she is an optimist? Why, briefly backpacker is planning a three-day trip in the backcountry with a friend. She wishes to keep the weight of her pack to a minimum. She has decided to bring either rock climbing shoes or an extra fleece jacket but not both. The fleece jacket will be useful if the weather is cold. The rock climbing shoes will be useful if the weather is warm. In trying to decide which of these two items to bring, the backpacker decides on the utilities shown in the following payoff matrix: 18) A 18) Warm Cold Weather Weather Rock climbing shoes f +28 -10 Fleece jacket -16 +38 wehdhaf th lecm sosaedrdenity c. 101

Explanation / Answer

Probability of cold weather = 0.4
So probability of hot weather = 1-0.4= 0.6;

So, if she chooses rock climbing shoes, her weighted utility will be : = 0.6 * 28 + 0.4* (-10) = 16.8-4 = 12.8 ;
If she chooses fleece jacket, her weighted mean utility will be : = 0.6 * ( -16) + 0.4 (38) = -9.6+ 15.2 = 5.6;

Here, we see that weather probability weighted utility of choosing rock climbing shoes is 12.8 which is greater than that of fleece jacket which is 5.6;
So it would be better to go for rock climbing shoes as per the utility of the given payoff matrix;

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