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5. Suppose that you are considering the installation of higher levees in New Orleans that will protect from a sea level rise of 3 feet
5. Suppose that you are considering the installation of higher levees in New Orleans that will protect from a sea level rise of 3 feet as opposite to a sea level rise of 1 foot. The table below gives a similar set of outcomes as in Table 12.1 in the text - these refer to the net income obtained by an individual with a property within the range of being affected by the levee. New levees 120 No new levees 100 Probability of event 0.50 Contingency Sea level rise of 1 foot Sea level rise of 3 feet 100 50 0.50 Calculate expected income with and without new levees, expected surplus from new levees, and the option price of the new levees with a utility function of the form u =In(c). 5. Suppose that you are considering the installation of higher levees in New Orleans that will protect from a sea level rise of 3 feet as opposite to a sea level rise of 1 foot. The table below gives a similar set of outcomes as in Table 12.1 in the text - these refer to the net income obtained by an individual with a property within the range of being affected by the levee. New levees 120 No new levees 100 Probability of event 0.50 Contingency Sea level rise of 1 foot Sea level rise of 3 feet 100 50 0.50 Calculate expected income with and without new levees, expected surplus from new levees, and the option price of the new levees with a utility function of the form u =In(c)
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