Question: Please explain and be organized to explain why the expect value is 0.1*1000 A GENERAL FRAMEWORK AND FIRST CRITERIA 1.1 Preference order Suppose you do
Please explain and be organized to explain why the expect value is 0.1*1000

A GENERAL FRAMEWORK AND FIRST CRITERIA 1.1 Preference order Suppose you do a job for which you should be paid $50. Your employer suggest to pay (r.v.) 100 with probability 1/2, = 0 with probability 1/2. So, E{E} = 50, the same as the original pay. Suppose you buy auto insurance against a possible future loss . Assume that with prob- ability 0.9 the r.v. & = 0 (nothing happened), and with probability 0.1, the loss & is uniform on ($0, $2000). Then E{E} = 0.1 1000 = 100. A GENERAL FRAMEWORK AND FIRST CRITERIA 1.1 Preference order Suppose you do a job for which you should be paid $50. Your employer suggest to pay (r.v.) 100 with probability 1/2, = 0 with probability 1/2. So, E{E} = 50, the same as the original pay. Suppose you buy auto insurance against a possible future loss . Assume that with prob- ability 0.9 the r.v. & = 0 (nothing happened), and with probability 0.1, the loss & is uniform on ($0, $2000). Then E{E} = 0.1 1000 = 100
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