You are choosing among three investment plans. The payoffs of these investment plans depends on next year's GDP (see the table below.) You believe that next year's GDP will decrease with a probability of 0.3, level with a probability of 0.2, and increases with a probability of 0.5. Which alternative should be chosen based on expected value criterion?
|
GDP decreases |
GDP levels |
GDP increases |
| Plan 1 |
$10,000 |
$12,000 |
$13,000 |
| Plan 2 |
$7,000 |
$15,000 |
$15,500 |
| Plan 3 |
$11,000 |
$11,000 |
$11,500 |
Plan 1, Plan 2, Plan 3, or not enough information to answer this question?