u(x) = 1/b - 1*(a + b + x) 1 - 1/6) = *
-
- Site Admin
- Posts: 899603
- Joined: Mon Aug 02, 2021 8:13 am
u(x) = 1/b - 1*(a + b + x) 1 - 1/6) = *
wealth x = 13 and is
exposed to a gamble that yields +3 with probability 1=2 and 3 with
probability
1=2, what is the expected utility of this decision maker when she
is exposed to the
gamble?
(c) How much would the decision maker (for whom a = 1, b = 1=2, and
x = 13) at most
be willing to pay to an insurance company in order to avoid the
gamble specified
in the previous question (b)?
u(x) = 1/b - 1*(a + b + x) 1 - 1/6) = *