Total amount of money taken by the family business

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A family of five brothers namely (Ade, Bode , Clement, Diran and  Effiong) runs the business of their late parent. By agreement, they collectively take decision based on majority as to what job to take or not. A private company (P) offers the family business a job, whose pay depends on certain conditions. They all agree that if they take up the job, there is a 25% chance they will succeed and make N4000 for the company, a 35% chance they will earn N1000 and a 40% chance that they earn nothing. If they take up the job, they must forgo another offer from a government enterprise (G) in which they believe that they will earn N2000 with certainty. Assume that:

Ade has utility function U(X) = X,  Bode has utility function U(X) , Clement has utility function U(X) = X4/5, Diran has utility function U(X) = X1/2, Effiong has utility function U(X) = X1/4, where X is the total amount of money taken by the family business.

  • Which of the jobs will the familybusiness take , based on expected monetary value (EMV) of return?
  • Given their utility functions, how would each of the brothers vote for the jobs?
  • Based on your result in "b'', will the brothers take the private company offer or not?

Reference no: EM131097435

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