Question
Let two individuals A and B whose utility functions are quoted below U(W) = 100 log(W), call it function A (same as in your notes)
Let two individuals A and B whose utility functions are quoted below
U(W) = 100 log(W), call it function A (same as in your notes)
U(W) = 150 log(W), call it function B
Just as in your notes, both individuals have a $200,000 endowment
Also, just as in your notes there is a game of luck where the two individuals may wish to participate.
$250,000 with probability 0.5
$150,000 with probability 0.5
a. | The certainty equivalent of A is greater than that of B | b. | The certainty equivalent of A is less than that of B | c. | The certainty equivalent of A equals that of B | d. | Cannot tell |
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