How much more utility will each individual get

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Reference no: EM131072432

Use the data in Table 7.2 to compute the average utility that each participant gets from his or her income in the different situations under the following assumption about utility: with no pooling of risk, the utilities are either from obtaining $5000 or from obtaining zero. But, with risk pooling, there is also the possibility of getting the utility associated with an income of $2500. Suppose that the utility from getting a zero income is zero, the utility from $2500 is 50, and the utility from $5000 is 70.7.

(a) How much more utility will each individual get, on average, when sharing his or her income with their partner relative to when not sharing?

Table 7.2

Reference no: EM131072432

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