Using Scenario 2 suppose Bill has eliminated one of the answers but is unsure of which of the remaining four answers are correct. Determine whether it is rational for Bill to guess
What will be an ideal response?
What we need to do is to compute the expected value of guessing and compare it to the expected value of leaving the question unanswered. The expected value of guessing if he has eliminated one answer is ¼ (9) + ¾ (-5) = 9/4 – 15/4 = -6/4 = -3/2 or -1.5 . Since this is less than the expected utility of skipping the question with a value of zero Bill should elect not to answer the question.
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