Suppose that my utility function is u(w) = ⁰.1 (a) If I played one round of the St. Petersburg Lottery, would would my expected utility be? Assume I currently have zero wealth, and round your answer to two decimals places. Note that in order to compute my expected utility, you will need to sum a geometric series. Expected Utility = 2.15 utiles. (b) Use your rounded answer from (a) to determine my certainty equivalent for the St. Petersburg Lottery. Round your answer to the nearest cent. Certainty Equivalent = $ 2110.50

Suppose that my utility function is u(w) = ⁰.1 (a) If I played one round of the St. Petersburg Lottery, would would my expected utility be? Assume I currently have zero wealth, and round your answer to two decimals places. Note that in order to compute my expected utility, you will need to sum a geometric series. Expected Utility = 2.15 utiles. (b) Use your rounded answer from (a) to determine my certainty equivalent for the St. Petersburg Lottery. Round your answer to the nearest cent. Certainty Equivalent = $ 2110.50

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.10P

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