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Elvira is a risk-weighted expected utility maximizer with risk function r ( p ) = p 2 and utility function u ($ x ) =log
Elvira is a risk-weighted expected utility maximizer with risk function r(p) =p2 and utility function u($x) =log2(x). Find her maximum buying price and her minimum selling price for both of the following wagers (with the probabilities given along the top).
0.5 | 0.4 | 0.1 | |
A | $16 | $32 | $64 |
B | $32 | $16 | $16 |
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