Consider a consumer with an expected utility preference with t.docx - Consider a consumer with an expected utility preference with the utility function

Consider a consumer with an expected utility preference with t.docx

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Consider a consumer with an expected utility preference with the utility function u(m) = m. Consider two lotteries the consumer may face: 13 Lottery A: Lose $50 with probability 4 , win $20 with probability 4 . Lottery B: Lose $20 with probability 1 , lost $10 with probability 6 , win $30 with 10 10 probability 3 10 Suppose the consumer s original income is 100. (a) What is the consumer s expected income for each lottery? (b) What is the consumer s expected utility for each lottery? (c) Which lottery does the consumer prefer more? Consider a consumer with an expected utility preference with the utility function u(m) = m. Consider two lotteries the consumer may face: 13 Lottery A: Lose $50 with probability 4 , win $20 with probability 4 . Lottery B: Lose $20 with probability 1 , lost $10 with probability 6 , win $30 with
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  • Spring '08
  • OBIAKU

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