Public service Indiana (PSI) is considering two sites for a nuclear power plant. The following two attributes will influence its determination about where to build the plant: Attribute 1 Cost of the plant (in millions of dollars)
Attribute 2 Acres of land damaged by building the plant
Assume that PSI’s multiattribute utility function is given by u1(x1, x2) = .70u1(x1) + .20u2(x2) + .10u1(x1)u2(x2), where u1(x1) = .1 + exp( .1x1) and u2(x2) 2.5 2.5 exp(.0006x2 .48).
Two locations for the power plant are under consideration. Location 1 is equivalent to the following lottery:
and location 2 is equivalent to the following lottery:
Which location should be chosen?