a. Suppose that Schuyler faces the choice of whether to take a gamble that results in $120 with probability 0.50, and -$100 with 0.50 probability. Suppose that Schuyler's preferences can be represented by the value function in (6.15). Would she take the gamble? Would she be willing to take four of these gambles?
b. Suppose that Sydney would turn down a single case of this gamble. Consider a gamble that results in a loss of $600 with probability 0.5 and a gain of x with the remaining probability. If we knew Sydney behaved according to expected utility, how much would x need to be before he could possibly be willing to take the new gamble? Use equation 6.23 to produce your answer.