Suppose that the outcome space contains three outcomes {1,2,3). Consider the following four lotteries: A (0.3, 0.7,0) B = (0,0.8,0.2) (0,0.5, 0.5) C = D = (0.6, z, y) Assume that a decision maker is indifferent between A and B, and is indifferent between C and D. Suppose the decision maker's preferences over lotteries satisfy the Independence Axiom, find out 1.y. (Hint: You can use graph to get intuition.)

Suppose that the outcome space contains three outcomes {1,2,3). Consider the following four lotteries: A (0.3, 0.7,0) B = (0,0.8,0.2) (0,0.5, 0.5) C = D = (0.6, z, y) Assume that a decision maker is indifferent between A and B, and is indifferent between C and D. Suppose the decision maker's preferences over lotteries satisfy the Independence Axiom, find out 1.y. (Hint: You can use graph to get intuition.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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