dominance Ralph is contemplating various lotteries. The possible prizes are 100, 200,300, or 400 dollars. Assume in what follows that more is strietly preferred to le ss dollars.

Below are some representative lotteries:

100 200 300 400 a .1 .9 b .2 .8 c .2 .8 d .25 .25 .25 .25 e .15 .35 .25 .25 f .24 .21 .25 .30 For example, lottery c retums the prize of 100 with probability .2 and the prize of 300 with probability .8.

a] Consider lotteries

a, b, and

c. Which choice from among the three is best? Try an expected utility analysis with several different U(·) functions. Why does lottery a always tum out to be best?
b] Do the same thing for lotteries d and f e] Nowconsider lotterlese andf Exhibit one U(·) function such that e is the best choice and another such thatfis the best choice. What is the explanation?AppendixLO1