Wilfred’s expected utility function is  px1^0.5+(1−p)x2^0.5, where p is the probability that he consumes x1 and 1 - p is the probability that he consumes x2. Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2500 with probability p = 0.4 and $3700 with probability 1 - p. Wilfred will choose the sure payment if Z > CE and the lottery if Z < CE, where the value of CE is equal to ___ (please round your final answer to two decimal places if necessary)

A First Course in Probability (10th Edition)
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ISBN:9780134753119
Author:Sheldon Ross
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Chapter1: Combinatorial Analysis
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Wilfred’s expected utility function is  px1^0.5+(1−p)x2^0.5, where p is the probability that he consumes x1 and 1 - p is the probability that he consumes x2. Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2500 with probability p = 0.4 and $3700 with probability 1 - p.

  • Wilfred will choose the sure payment if Z > CE and the lottery if Z < CE, where the value of CE is equal to ___

(please round your final answer to two decimal places if necessary)

 
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