Consider the RDEU scheme Let F be the uniform distribution on 0,b , u(x) x , and (p) p Find a certainty equivalent and show that for 1 it is larger than for 1 (the expected utility case) Interpret this Consider the case 1 ...

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Consider the RDEU scheme. Let F be the uniform distribution on [0,b], u(x) = x ,

Question:

Consider the RDEU scheme. Let F be the uniform distribution on [0,b], u(x) = x^α, and Ψ(p) = p^β. Find a certainty equivalent and show that for β > 1 it is larger than for β = 1 (the expected utility case). Interpret this. Consider the case β < 1.

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