Pablo follows the Delta Property for deals with prospects between -$1000 and $1000 and he prefers more money to less. His certain equivalent is $300 for a deal with a 0.8 chance at $500 and a 0.2 chance at $100. If x is measured in dollars, which following u-curves are consistent with Pablo's preferences? a) u(x) = 10- b) u(x) = 1 - 0.25 c) u(x) = 5 2x4-x/300 d) u(x) = 0.25-x/200 10 x4 */200 -x/200

Pablo follows the Delta Property for deals with prospects between -$1000 and $1000 and he prefers more money to less. His certain equivalent is $300 for a deal with a 0.8 chance at $500 and a 0.2 chance at $100. If x is measured in dollars, which following u-curves are consistent with Pablo's preferences? a) u(x) = 10- b) u(x) = 1 - 0.25 c) u(x) = 5 2x4-x/300 d) u(x) = 0.25-x/200 10 x4 */200 -x/200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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