Question: Mr. Rubin has determined that his utility function for a change in fortune on the interval-100 rs 500 is U(r) (0.62) log[(0.004)r+1]. (a) He is

Mr. Rubin has determined that his utility function for a change in fortune on the interval-100 rs 500 is U(r) (0.62) log[(0.004)r+1].

(a) He is offered a choice between $100 and the chance to participate in a gamble wherein he wins $0 with probability and $500 with probability !. Which should he choose?

(b) Suppose he is offered instead a chance to pay $100 to participate in the gamble. Should he do it?

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