Neumann-morgenstern utility function of the form

Assignment Help Operation Management

Reference no: EM13994959

Billy John Pigskin of Mule Shoe, Texas, has a von Neumann-Morgenstern utility function of the form . Billy John also weighs about 300 pounds and can outrun jackrabbits and pizza delivery trucks. Billy John is beginning his senior year of college football. If he is not seriously injured, he will receive a $1,000,000 contract to play professional football. If an injury ends his football career, he will receive a $10,000 contract as a refuse-removal facilitator in his home town. There is a 10% chance that Billy John will be injured badly enough to end his career.

(a) What is Billy John's expected utility? __________

(b) If Billy John pays $p for an insurance policy that would give him $1,000,000 if he suffers a career-ending injury in college, then he would be sure to have an income of $1,000, 000 - p no matter what happened to him. Write an equation that can be solved to find the largest price Billy John would be willing to pay for such an insurance policy. __________

Reference no: EM13994959

Questions Cloud

Bernoulli-binomial-poisson and geometric distributions : When do you know when to use the Bernoulli, Binomial, Poisson, and Geometric distributions? Please provide 150-200 words.

Potential conflict between laws in your state : Your thoughts about how various legal guidelines, ethics codes, and specialty guidelines influence diagnosis and assessment in general. Reference at least one potential conflict between laws in your state, ethical guidelines, or specialty guidelin..

Two firms face the same wage and rental price of capital : If two firms face the same wage and rental price of capital but spend different amounts labor and capital, how do their isocost lines differ? What is the effect on their isocost lines if the wage rate increases?

Management feels an assessment is probable : Management feels an assessment is probable, and if an assessment is made an unfavorable settlement of $13 million is reasonably possible.

Neumann-morgenstern utility function of the form : Billy John Pigskin of Mule Shoe, Texas, has a von Neumann-Morgenstern utility function of the form . Billy John also weighs about 300 pounds and can outrun jackrabbits and pizza delivery trucks. Billy John is beginning his senior year of college foot..

Positive test diagnose the disease : 1. (a) Suppose 1 in 1000 persons has a certain disease. A test detects the disease in 95% of diseased persons. The test also "detects" the disease in 1% of healthy persons. With what probability does a positive test diagnose the disease?

What is the theory of social constructivism : What does the author mean by what she calls taking a 'sociocultural stance' in understanding delusions? What is the theory of social constructivism

Utility function for consumption in the two states of nature : Sidewalk Sam, from the previous problem, has the utility function for consumption in the two states of nature where cs is the dollar value of his consumption if it shines, cr is the dollar value of his consumption if it rains, and π is the probabilit..

What is the bertrand model-relationship to the cournot model : Consider two identical firms (A and B) that face the following linear market demand curve and marginal cost: Calculate the Cournot equilibrium quantity per firm and price in this market. What is the distinguishing characteristic of oligopoly in relat..

User Account

All Pages