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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