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

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