If p is the probability of Event 1 and (1 p) is the probability of Event 2, based on the expected returns, for what values of p would you choose A? B? C? Values in the table are payoffs. Choice/Event Event 1 Event 2 A 0 20 B 4 16 C 8 0 (Here are some hints for solving this question, since it s somewhat challenging: o first derive the expected returns, as a function of p, for each of the three choices, A, B, C. o then compare the expected returns in pairs to see for what ranges of p: (1) A s return exceeds B s and vice versa (2) A s return exceeds C s and vice versa (3) B s return exceeds C s and vice versa This should give you enough information to answer the question. It might also help to graph each return function against p. Remember that since p is a probability, it can only take on values between 0 and 1.)

# If p is the probability of Event 1 and (1 p) is the probability of Event 2, based on the expected returns, for what values of p would you choose A? B? C? Values in the table are payoffs. Choice/Event Event 1 Event 2 A 0 20 B 4 16 C 8 0 (Here are some hints for solving this question, since it s somewhat challenging: o first derive the expected returns, as a function of p, for each of the three choices, A, B, C. o then compare the expected returns in pairs to see for what ranges of p:

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