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题目
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Suppose a decision maker has a utility function and is faced with a lottery where there is a 30% chance of earning $30 and a 70% chance of earning $80. What is the expected utility of this lottery?

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思路分析
To evaluate the expected utility, we need to apply the given utility function to each possible outcome and then weight by the respective probabilities. First, identify the utility function: U(I) = sqrt(I). This means the utility of an income I......Login to view full explanation

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Consider the risky investment we considered in class: Emma is considering buying a stock that has a 50% chance of being worth 10 and a 50% chance of being worth 70 at the future date on which she would want to sell the stock. Suppose Emma does some more analysis and changes her mind about the subjective probability distribution. The stock actually has a 50% chance of being worth 0 and a 50% chance of being worth 80. Given this change, which of the following statements is true?

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