Question: Question 1

Suppose you are considering changing jobs and there are 3 potential employers, each of whom wants to interview you at 1 PM tomorrow (you cannot interview with more than one potential employer).

Chase Bank has a 50% chance of making you an offer

If they make you an offer, the offer will be $130 thousand with likelihood = 40%

If they make you an offer, the offer will be $100 thousand with likelihood = 45%

If they make you an offer, the offer will be $70 thousand with likelihood = 15%

Merrill Lynch has a 60% chance of making you an offer

If they make you an offer, the offer will be $115 thousand with likelihood = 50%

If they make you an offer, the offer will be $105 thousand with likelihood = 10%

If they make you an offer, the offer will be $95 thousand with likelihood = 20%

If they make you an offer, the offer will be $85 thousand with likelihood = 20%

Goldman Sachs has a 70% chance of making you an offer

If they make you an offer, the offer will be $120 thousand with likelihood = 20%

If they make you an offer, the offer will be $100 thousand with likelihood = 30%

If they make you an offer, the offer will be $80 thousand with likelihood = 50%

a) Which alternative is the maximax decision? (Justify your response).

b) Assuming an offer, which alternative is the maximin decision? (Justify your response).

c) What is the EMV for each of the three options?