Question: There is an individual with a well-behaved utility function (i.e., U' > 0 and U There is an individual with a well-behaved utility function

There is an individual with a well-behaved utility function (i.e., U' > 0 and U" < 0), and initial wealth Y. Let a lottery

offer a payoff of G with probability IT and a payoff of

B with probability (1 - IT). a) (5 marks) Ifthe individual already

There is an individual with a well-behaved utility function (i.e., U' > 0 and U "

There is an individual with a well-behaved utility function (i.e., U' > 0 and U" < 0), and initial wealth Y. Let a lottery offer a payoff of G with probability IT and a payoff of B with probability (1 - IT). a) (5 marks) Ifthe individual already owns this lottery, denote the minimum price he would sell it for by ps. Write down the expression ps has to satisfy.

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