Mr. E. Kisan is eager to make his utility function explicit. So he approaches his financial...
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Mr. E. Kisan is eager to make his utility function explicit. So he approaches his financial consultant, Mr. Chelumala Rishi Revanth for help who places before Mr. Kisan a choice of a lottery giving either Rs. 10 (say W,) or Rs. 100 (say W) with probabilities p and (1-p) respectively. As the value of p is changed Mr. E. Kisan makes a decision and is able to decide on each corresponding values of C (certainty equivalent). The financial consultant, Mr. Chelumala Rishi Revanth, assigns U(W) = W, hence E[U(W)] = p*W, + (1-p)*W. Using this information we have the following table P 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 E[U(W)] 10091 82 73 64 55 46 37 28 19 10 110 100 90 75 60 50 35 25 15 10 05 C What can you say about the characteristics of the utility function of Mr. Kisan? Draw graphs wherever necessary (use graph paper as provided). Mr. E. Kisan is eager to make his utility function explicit. So he approaches his financial consultant, Mr. Chelumala Rishi Revanth for help who places before Mr. Kisan a choice of a lottery giving either Rs. 10 (say W,) or Rs. 100 (say W) with probabilities p and (1-p) respectively. As the value of p is changed Mr. E. Kisan makes a decision and is able to decide on each corresponding values of C (certainty equivalent). The financial consultant, Mr. Chelumala Rishi Revanth, assigns U(W) = W, hence E[U(W)] = p*W, + (1-p)*W. Using this information we have the following table P 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 E[U(W)] 10091 82 73 64 55 46 37 28 19 10 110 100 90 75 60 50 35 25 15 10 05 C What can you say about the characteristics of the utility function of Mr. Kisan? Draw graphs wherever necessary (use graph paper as provided).
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Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
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