Assume that the decision maker's utility u of money is linear.
Consider
- 1/2 1/4 1/4
a1 $49 $24 $25
a2 $36 $100 $0
a3 $81 $0 $0
according to the principle of maximizing expected money value, which should be chosen?
Context: I am going through "An Introduction to Decision Theory" by Martin Peterson and the book says a2 which I cannot arrive at. Here is my work:
a1 = 1/2 x 49 + 1/4 x 25 + 1/4 x 25 = 49.5
a2 = 1/2 x 36 + 1/4 x 100 + 1/4 x 0 = 43
a3 = 1/2 x 81 + 1/4 x 0 + 1/4 x 0 = 40.5
I come up with a1. Where am I going wrong?