Suppose that individuals have the following preferences over income: 0(1) = 1% c) Suppose that the state is interested in starting a new lottery...
View the step-by-step solution to:

Question

# Please help me solve this problem ATTACHMENT PREVIEW Download attachment Screen Shot 2019-10-14 at 10.54.16 PM.png Suppose that individuals have the following preferences over income: 0(1) = 1% c) Suppose that the state is interested in starting a new lottery game. For this new game, players pay one dollar and are allowed to select a number from the following list: 0000, 0001, 0002, 0003,...,9999. There are ten thousand numbers total. The state will randomly select one of the numbers from the list. If the number the player selects is equal to the number selected by the state, then the player wins a prize. Given that individuals have the same preferences over income U(l) = IA(3!2) and the existence of the other game, what is the minimum prize amount that must be offered so that individuals will be willing to play the new game? Again, assume that everyone has 100 dollars in income.

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents