Given A Lottery P Let E P Be The Expected Value Of The Lottery P For Example If P 10 3618696

Given a lottery P, let E (P) be the expected value of the lottery P. For example, if P = ($10, 0.5; $0, 0.5), then E (P) = 0.5 × 10 + 0.5 × 0 = 5 (1) Ann has vNM utility u1 (x) = x, Bob has utility u2 (x) = v x and Carl has utility u3 (x) = x^3 . Who is risk neutral, risk averse and risk loving? (2) Consider the lottery P again. Find the dollar amount x such that each person is indifferent between the lottery P and $x (x is the certainty equivalent of P)

Prof. Angela


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