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Sidewalk Sam, from the previous problem, has the utility function for consumption in the two states of nature

u(cs, cr, π) = c1−πs cπr,

Where cs is the dollar value of his consumption if it shines, cr is the dollar value of his consumption if it rains, and π is the probability that it will rain. The probability that it will rain is π = .5.

(a) How many units of consumption is it optimal for Sam to consume conditional on rain?

(b) How many rain coupons is it optimal for Sam to buy?

u(cs, cr, π) = c1−πs cπr,

Where cs is the dollar value of his consumption if it shines, cr is the dollar value of his consumption if it rains, and π is the probability that it will rain. The probability that it will rain is π = .5.

(a) How many units of consumption is it optimal for Sam to consume conditional on rain?

(b) How many rain coupons is it optimal for Sam to buy?

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