Question: Suppose that a rank dependent individual is given who has weighting function g(p) = VP and utility index u(x) = x. Consider the lottery

Suppose that a rank dependent individual is given who has weighting function

Suppose that a rank dependent individual is given who has weighting function g(p) = VP and utility index u(x) = x. Consider the lottery below: Prob .25 .75 3 Is this lottery better or worse than two dollars for sure? Does your answer change when g(p) = p? Finally, find the certainty equivalent of the lottery for each of the two cases.

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