Suppose that my utility function is u(w) = w0.8. (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 = 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 = $

Suppose that my utility function is u(w) = w0.8. (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 = 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 = $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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