Question

What is the difference between expected utility and the utility of the expected value? How do you calculate each?

Answer 1

Answer : There is a difference between expected utility as well as utility of expected value as follows :

• Expected utility is associated with the optiumal decision can be chosen . There are various alternative and best one taken out from them in order to provide effective result.
• Utility of expected value means each alternative has been multiplied by the probability which shows maximum gain they received and than measure in the utility .
• Utility of expected value formula :

In case of utility of expected value we used this formula .

• Expected utility has been calculated in such a manner as follows. Expected utility
• E(U)=Sum of expected value from each alternative