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Question: Suppose that a player's salary is tied to his performance on the field in the following way. If he has a "good" season, he earns $100,000, and if he has a "bad" season he earns $50,000. Suppose the probability of each outcome is .50. Also, suppose the player's utility function over his wage is given by U= √(w)
(a) Derive the player's expected utility.
(b) Derive the player's expected income.
(c) Show that the player enjoys higher utility than in (a) if he receives a guaranteed wage equal to his expected income as calculated in (b).
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