5. Suppose your utility is log f and you are offered the opportunity to buy as many tickets paying $1 if event A occurs and 0 otherwise. You have probability q that event A will occur. Tickets cost $ x each. How many tickets would you optimally buy?

n 6. Reconsider the maximization of (7.60) subject to the constraint i=1 gi = 1. Perform this maximization by substituting gn = 1−g1 −g2 −. . .−gn−1 into (7.60) and maximize with respect to g1, . . . , gn 1. Do you get the same result? Which metho

− d do you prefer, and why?