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28 Sep 2019
4. Olivia has a utility function pW, where W is his wealth in millions of dollars. Currently, she has $4 million. Imagine that she can pursue a project that is equally likely to result in a loss of $L million and a gain of $G million. Would she pursue the project if (a) G=2 and L=2; (b) G=5 and L=3; (c) G=6.5 and L=3.5; (d) G=9 and L=3.8; (e) Is there a case from the ones listed above where Olivia is indifferent between pursuing and not pursuing the project? if yes, which one?
4. Olivia has a utility function pW, where W is his wealth in millions of dollars. Currently, she has $4 million. Imagine that she can pursue a project that is equally likely to result in a loss of $L million and a gain of $G million. Would she pursue the project if (a) G=2 and L=2; (b) G=5 and L=3; (c) G=6.5 and L=3.5; (d) G=9 and L=3.8; (e) Is there a case from the ones listed above where Olivia is indifferent between pursuing and not pursuing the project? if yes, which one?
Darryn D'SouzaLv10
28 Sep 2019
