2) Examine these two lotteries:

A: 0.4 chance of 10; 0.3 chance of 7; 0.3 chance of 3

B: 0.25 chance of 16; 0.3 chance of 6; 0.45 chance of 3

Suppose that the decision maker has a utility function U=(Y)1/3 where U is utility and Y is the amount of money.

i) Work out the Expected Values, Variances and Expected Utility for each lottery.

ii) Using the values in part (i) predict which lottery the decision maker will choose.

Comment on your prediction and explain why some measures are better than others for predicting such decisions.