In Problem 18, what is each student€™s maximized expected utility? Who has the larger expected wealth? Who ends up with the larger wealth at the end of the summer?
There is a 50 percent chance that either of them will be successful and end up with $21,000 of wealth to get them through the next school year. But there is also a 50 percent chance that either will end up with only $3,000 of wealth. Each could take a completely safe but back-breaking job picking fruit that would leave them with a guaranteed $9,000 at the end of the summer. The table shows Jim€™s and Kim€™s utility of wealth schedules.

Transcribed Image Text:

Wealth Jim's utility 3,000 9,000 Kim's utility 0 100 6,000 9 200 350 475 560 620 660 680 200 12,000 391 15,000 586 18,000491 680 21,000