15.8. Consider two lotteries A and B. With lottery A, there is a 0.8 probability that you...

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15.8. Consider two lotteries A and B. With lottery A, there is a 0.8 probability that you receive a payoff of

$10,000 and a 0.2 chance that you receive a payoff of

$4,000. With lottery B, you will receive a payoff of

$8,800 for certain. You should verify for yourself that these two lotteries have the same expected value, but that lottery A has a higher variance. For each of the utility functions below, please fill in the table below:

U ! 1I " 500.

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Microeconomics

ISBN: 9780470563588

4th Edition

Authors: David Besanko, Ronald Braeutigam

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