u(x) = 1/b - 1*(a + b + x) 1 - 1/6) = *

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answerhappygod
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u(x) = 1/b - 1*(a + b + x) 1 - 1/6) = *

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U X 1 B 1 A B X 1 1 6 1
U X 1 B 1 A B X 1 1 6 1 (969 Bytes) Viewed 87 times
(b) Assume that a = 1 and b = 1=2. If the decision maker has
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) = *
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