Consider the following money lotteries: ?1=(5/6,3000;1/6,500) ?2=(2/3,3000;1/3,500) ?3=(1/4,3000;1/4,2000;1/4,1000;1/4,500) ?4=(1/2,2000;1/2,1000) Leslie says that she is indifferent between lottery ?1 and getting $2000 for sure is indifferent between lottery ?2 and getting $1000 for sure prefers lottery ?3 over lottery ?4 Explain carefully whether or not Leslie is rational according to the theory of expected utility.

Consider the following money lotteries: ?1=(5/6,3000;1/6,500) ?2=(2/3,3000;1/3,500) ?3=(1/4,3000;1/4,2000;1/4,1000;1/4,500) ?4=(1/2,2000;1/2,1000) Leslie says that she is indifferent between lottery ?1 and getting $2000 for sure is indifferent between lottery ?2 and getting $1000 for sure prefers lottery ?3 over lottery ?4 Explain carefully whether or not Leslie is rational according to the theory of expected utility.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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