Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Chapter 7, Problem 7.1P
To determine
To find: Minimum probability to win.
Expert Solution & Answer
Explanation of Solution
Given the even money placed on bulls = $100,000
The current wealth = $1,000,000
Since the utility function is logarithmic, expected utility from betting and not betting should be equal.
The minimum probability to win is 0.525.
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