Suppose preferences can be represented by PT with w+ (p) = p and w(p) = p...

 

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Suppose preferences can be represented by PT with w+ (p) = p² and w¯(p) = p as well as value function v(x) = = S√T, |-2√√-x, x>0 x < 0. Calculate the utlity and certainty equivalents of the following lotteries. (a) µ₁ = (0.1, 9; 0.4, −4; 0.4, 4; 0.1, -9) (b) 2 (0.3,-9; 0.2, 25; 0.1, 36; 0.4, -16) = (c) μ3 (0.2, -5; 0.3, -2; 0.35, 7; 0.15, 12) (a) μ4 = (0.1, -16; 0.1, -9; 0.1, 25; 0.7,36) Suppose preferences can be represented by PT with w+ (p) = p² and w¯(p) = p as well as value function v(x) = = S√T, |-2√√-x, x>0 x < 0. Calculate the utlity and certainty equivalents of the following lotteries. (a) µ₁ = (0.1, 9; 0.4, −4; 0.4, 4; 0.1, -9) (b) 2 (0.3,-9; 0.2, 25; 0.1, 36; 0.4, -16) = (c) μ3 (0.2, -5; 0.3, -2; 0.35, 7; 0.15, 12) (a) μ4 = (0.1, -16; 0.1, -9; 0.1, 25; 0.7,36)

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SOLUTION To calculate the utility and certainty equivalents of the given lotteries we will use the p... View the full answer