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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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