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Unformatted text preview: Ev(sue) = probability(Winning) x (4000 fee) + (1 probability(winning)) x (-Fee) Set EV(sue) = EV(Dont Sue) Trying to maximize expected value-Most utility is deprive from this analysis (strictly using dollars) ASSIGN PROBABLITIES TO EACH OPTION R&D yes 2 million R&D no .2(3) + .55(21) + .25(43) = 22.9 million .7(23) + .3(-10) You dont need to set the options equal to each other if one of the options has their higher utility regardless Quality adjusted life expectancy turn qualities of life into numbers- negative numbers mean worse than death...
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- Fall '11