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1. The Lamberts family have three children: Macy, Theodore, and Jane. Each of them has different attitude towards money. In particular, Macy's utility function is
1. The Lamberts family have three children: Macy, Theodore, and Jane. Each of them has different attitude towards money. In particular, Macy's utility function is U(x)=6+0.5x and Theodore's utility function is U(x)=5x1/2. Unfortunately, we don't know Jane, the youngest kid's utility function yet. a) Given their utility functions, what are Macy and Theodore's u-values if they can get each of the following monetary payoffs for sure (fill your answers in the table)? b) Draw the utility curves for Macy and Theodore (you can either draw 2 curves separately or on the same graph). Label them carefully. c) Now both are facing the following uncertain deal (Deal A). Find Macy's and Theodore's expected u-values of Deal A. d) What are Macy's and Theodore's u-values of the certain equivalents of Deal A? e) What are their certain equivalents (CE) for Deal A? f) Compare the values of CE you found in the previous question. Explain why there is such difference in their CEs for the same deal
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