15.3. Consider two lotteries. The outcome of each lottery is the same: 1, 2, 3, 4, 5,...

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15.3. Consider two lotteries. The outcome of each lottery is the same: 1, 2, 3, 4, 5, or 6. In the first lottery each outcome is equally likely. In the second lottery, there is a 0.40 probability that the outcome is 3, and a 0.40 probability that the outcome is 4. Each of the other outcomes has a probability 0.05. Which lottery has the higher variance?

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Microeconomics

ISBN: 9780470563588

4th Edition

Authors: David Besanko, Ronald Braeutigam

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