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1. In the general model of deterrence in Chapter 11 of the Blair book, assume the following parameters and equations: W0$100,000= the wealth if one
1. In the general model of deterrence in Chapter 11 of the Blair book, assume the following parameters and equations: W0$100,000= the wealth if one doesn't cheat B=$100,000= the extra wealth if one cheats and is not detected F=$50,000= the penalty if one is detected and punished for cheating p=0.10= the probability of being detected and punished for cheating. U(W)=10W0.5 A. Find expected wealth, E(W). Show your work. B. Find U(W0). Show your work. C. Find E[U(W)] (the expected utility of wealth). Show your work. D. Calculate the value of the deterrence function (D=U(W0)E[U(w)]. Show your work. E. Will this person cheat, not cheat, or be indifferent between cheating and not cheating? Justify your answer. 1. In the general model of deterrence in Chapter 11 of the Blair book, assume the following parameters and equations: W0$100,000= the wealth if one doesn't cheat B=$100,000= the extra wealth if one cheats and is not detected F=$50,000= the penalty if one is detected and punished for cheating p=0.10= the probability of being detected and punished for cheating. U(W)=10W0.5 A. Find expected wealth, E(W). Show your work. B. Find U(W0). Show your work. C. Find E[U(W)] (the expected utility of wealth). Show your work. D. Calculate the value of the deterrence function (D=U(W0)E[U(w)]. Show your work. E. Will this person cheat, not cheat, or be indifferent between cheating and not cheating? Justify your
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