What can you say about their utility functions

Assignment Help Engineering Mathematics

Reference no: EM131524576

Question: Even without a formal assessment process, it often is possible to learn something about an individual's utility function just through the preferences revealed by choice behavior. Two persons, A and B, make the following bet: A wins $40 if it rains tomorrow and B wins $10 if it does not rain tomorrow.

a. If they both agree that the probability of rain tomorrow is 0.10, what can you say about their utility functions?

b. If they both agree that the probability of rain tomorrow is 0.30, what can you say about their utility functions?

c. Given no information about their probabilities, is it possible that their utility functions could be identical?

d. If they both agree that the probability of rain tomorrow is 0.20, could both individuals be risk-averse? Is it possible that their utility functions could be identical? Explain.

Reference no: EM131524576

Questions Cloud

Negotiation is a problem-solving process : Negotiation is a problem-solving process. You need to identify the problem, gather data, determine the best options, make a decision about the problem solution.

Review the given two scenarios : You have made a reservation to spend the weekend at the coast. To get the reservation, you had to make a nonrefundable $50 deposit.

Where did the situation occur and what is the effect : Who is involved?; Where did the situation occur?; Most importantly, why does this matter and what is the effect

What are skills necessary to be an effective project manager : Describe the reasons why IT projects differ from projects in other disciplines. What are the skills necessary to be an effective project manager? Elaborate.

What can you say about their utility functions : Even without a formal assessment process, it often is possible to learn something about an individual's utility function just through the preferences revealed.

Detailing the evolution of chosen health policy : Create a 700- to 1,050-word timeline detailing the evolution of your chosen health policy. Include the following:

Discuss the use of assessment technique : Assume that you are interested in purchasing a new model of a personal computer whose reliability has not yet been perfectly established.

Determine the main challenges that you would encounter : determine the main challenges that you would encounter during the project closeout process, and provide your strategy to address the challenges in question.

Discuss utility function for automobile life span : You are in the market for a new car. An important characteristic is the life span of the car.

User Account

All Pages