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Question: Eduardo, a confused graduate student, has just won the weekly Bingo prize, and now he has to choose among three alternatives. Although he follows the five Rules of Actional Thought, he is having trouble picking and he wants your help. In the first alternative, he is given a jar of balls. Some are red, and the others are white. If Eduardo picks a red ball, he wins $2500; if he picks a white ball, he wins $1000. The second alternative is a similar deal. However, if he picks a red ball from the second jar, he wins $3000; if not, he wins nothing. The third alternative is a sure $1500. Assume Eduardo is risk-neutral.
What percentage of red balls must be in jar two for him to be indifferent between alternative two and alternative three?
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