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Imagine a gambler with $10,000 and a utility function, U=w2, where w is the wealth that the gambler has initially. The gambler is about to
Imagine a gambler with $10,000 and a utility function, U=w2, where w is the wealth that the gambler has initially. The gambler is about to enter a game (at no cost). The game (think of it as a coin flip) gives $5,000 with a 50% chance and takes away $5,000 with a 50% chance. You try to dissuade the gambler from gambling by giving him some money. How much do you have to pay? Enter a number with two decimal points. Answer the question in dollar terms, i.e., if the answer is $20, enter 20.00
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