Expected utility, Managerial Economics

Assignment Help:

(Only for extra credit) Consider Freddy on a rainy Thursday afternoon after losing in his favorite video game. His friend Tommy comes over to cheer him up and offers him the following choice:

Lottery A: £10000 for sure (probability 100%)

  • Lottery B: £10000 with prob. 89%, £0 with prob. 1%, £50000 with prob. 10% Consider the same Freddy on a rainy Thursday afternoon after losing in his favorite video game. His other friend Carl comes over to cheer him up and Carl offers the following  choice for Freddy
  • Lottery C: £0 with prob. 89%, £10000 with prob. 11%
  • Lottery D: £0 with prob. 90%, £50000 with prob. 10%

To our surprise, in the ?rst case Freddy chooses A and in the second case Freddy chooses D. When you put these choices together can you conclude that Freddy is not maximizing his Expected Utility? If yes, why? If no, why not?


Related Discussions:- Expected utility

Long run equilibrium of a firm under monopoly, Long run Equilibrium of a Fi...

Long run Equilibrium of a Firm under Monopoly In the long run, firm has the time to adjust his plant size or to employ existing plant so as to maximise profit. Long run equili

Structure of population and supply of labour, THE STRUCTURE OF POPULATION A...

THE STRUCTURE OF POPULATION AND SUPPLY OF LABOUR The structure (also called age distribution or composition) of population, or the number of people in the different age groups

Discuss the impact of conflict in an organization, Question 1: Explain ...

Question 1: Explain the central theme of Scientific Management. Do you think that the scientific management enhances productivity in the organization? Give your arguments.

Advantages of a free market system, Advantages of a Free Market System ...

Advantages of a Free Market System Incentive:   People are encouraged to work hard because opportunities exist for individuals to accumulate high levels of wealth. Choice

Substitution effect on law of demand, Substitution Effect on law of demand ...

Substitution Effect on law of demand When price of a commodity falls it becomes comparatively cheaper if price of all other related goods, particularly of substitutes, remain c

Decision making, Explain how managerial economics is useful for decision ma...

Explain how managerial economics is useful for decision making

How medical services are funded in canada, Based on the information given i...

Based on the information given in the Canada Health Act as well as the information given in your Study Guide, write a description of how medical services are funded in Canada. Be s

Price elasticity of supply, Price Elasticity of Supply Price Elasticit...

Price Elasticity of Supply Price Elasticity of supply measures the degree of responsiveness of quantity supplied to changes in  price.  The co-efficient of the elasticity of s

Using the national output for calculating national income, Using the Nation...

Using the National Output for Calculating National Income A final method which is more direct is the "output method" or the value added approach .  This involves adding up

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd