HW9 Essay Example | Topics and Well Written Essays - 500 words

HW9 - Essay Example Extended Matrix 3: Once firm B enters and exits the market, the profitability chances collapse at the same time as the company loses $1,000,000. The only sound approached is considering paths NP and PN (this combination considers neutral risk taking) as it considers the N =Neutral path in both cases. c. By choosing to take 7500 and 50% gamble chances of winning between 5000 and 10000, the CEO is considered a risk taker as the cash amount and the expected outcome range only add up to $7500 + 0 = $7500 or $7500 + either $5000 or $10000 = either $12500 or $17500. d. From the utility function, the extended matrix show that the CEO has better changes of accepting $10,000 in cash and 50% gamble of winning between $7500 and $12500. This would make her returns 10,000 without risks and 50% chance of losing the opportunity to win 7500 or 12500. However, an ideal path from 1 on the above extended matrix show that accepting $10000 and taking the 50% gamble chance increases her chances of having 22500 if the gamble paid of. Either way, the taking of chances with decisions whose outcome can result to benefits or no benefits shows that the CEO is a risk