question archive For each of the following utility functions over wealth w, compute the following: i) the expected utility and the certainty equivalent of the lottery: 10% chance of ending up with $100 and 90% chance of ending up with $10,000; ii) x, where if you start with $10,000, you would be indifferent between gaining $x for sure and a free lottery ticket giving you a 1-in-1,000,000 chance of gaining $990,000 (and otherwise gaining nothing, thus staying at $10,000)
For each of the following utility functions over wealth w, compute the following: i) the expected utility and the certainty equivalent of the lottery: 10% chance of ending up with $100 and 90% chance of ending up with $10,000; ii) x, where if you start with $10,000, you would be indifferent between gaining $x for sure and a free lottery ticket giving you a 1-in-1,000,000 chance of gaining $990,000 (and otherwise gaining nothing, thus staying at $10,000)
Subject:EconomicsPrice: Bought3
For each of the following utility functions over wealth w, compute the following:
i) the expected utility and the certainty equivalent of the lottery: 10% chance of ending up with $100 and 90% chance of ending up with $10,000;
ii) x, where if you start with $10,000, you would be indifferent between gaining $x for sure and a free lottery ticket giving you a 1-in-1,000,000 chance of gaining $990,000 (and otherwise gaining nothing, thus staying at $10,000).
a) w0.5
b) log10(w)
c) w
d) w2
