EFM4-J

Two separate questions

#1 (200 words minimum)

Identify a situation from your own experience that involves making decisions using expected value, and detail the different options, expectations, and payouts. Discuss the risks involved with those expectations and, if applicable, the payouts. Include in your discussion an explanation of how to determine how much information to gather to minimize uncertainty. Finally, explain which decision should be made.

#2 (200 words minimum)

Identify an example of a management scenario from your own experiences or current events involving adverse selection or moral hazard. Describe some methods to correct the potential problems of the asymmetric information.