Jenny has $100. She can: Invest in Project A will end up with $100 Invest in...

Transcribed Image Text:

Jenny has $100. She can: Invest in Project A⇒ will end up with $100 Invest in Project B→ will end up with $100n Jenny states that "n" is a uniform random variable in the range [0,4]. It is also given that Jenny is an expected utility maximiser with Neumann-Morgenstern utility: u(x)=√x. Jenny knows Jim, who is a financial analyst that can give some reliable information on the risky investment. Jim is going to send Jenny one of the given messages: Message 2 3 st 4 Information 1≤g≤2 0≤g≤2 0≤g≤3 0.5 ≤g ≤ 1.5 Message Probability | ܢ ܐܚܐ ܕܐܡܪ ܠܝ ܬܡ | 4 1 1 Please give an explanation and calculation of the value of Jim's information to Jenny. Jenny has $100. She can: Invest in Project A⇒ will end up with $100 Invest in Project B→ will end up with $100n Jenny states that "n" is a uniform random variable in the range [0,4]. It is also given that Jenny is an expected utility maximiser with Neumann-Morgenstern utility: u(x)=√x. Jenny knows Jim, who is a financial analyst that can give some reliable information on the risky investment. Jim is going to send Jenny one of the given messages: Message 2 3 st 4 Information 1≤g≤2 0≤g≤2 0≤g≤3 0.5 ≤g ≤ 1.5 Message Probability | ܢ ܐܚܐ ܕܐܡܪ ܠܝ ܬܡ | 4 1 1 Please give an explanation and calculation of the value of Jim's information to Jenny.

Answer rating: 100% (QA)

To calculate the value of Jims information to Jenny we need to use the concept of expected utility Expected utility is the expected value of the utility of an outcome where the utility is a function o... View the full answer