Prospect Y = ($5, 0.25 ; $16, 0.75) If Will's utility of wealth function is given byu(x)=x^0.25,
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Question:
Prospect Y = ($5, 0.25 ; $16, 0.75)
If Will's utility of wealth function is given byu(x)=x^0.25, what is the value of CE(Y) for Will? (In other words, what is Will's certainty equivalent for prospect Y?)
(The certainty equivalent represents the maximum amount a person would be willing to pay to acquire a risky prospect, and equivalently, the lowest price for which they would be willing to sell a risky prospect if they already owned it)
(Note: The answer may not be a whole number; please round to the nearest hundredth)
Related Book For
Microeconomics Theory and Applications with Calculus
ISBN: 978-0133019933
3rd edition
Authors: Jeffrey M. Perloff
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