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Peter has the utility function u=w^a . Peter has a job with a fixed wage of 150 euros. He is offered a contract to rent
Peter has the utility function u=w^a . Peter has a job with a fixed wage of 150 euros. He is offered a contract to rent a plot of land.The profitability of the land (after he paid the rent) is uncertain. If the weather is good (which happens with probability q=0.5 , the profitability is 200 and if the weather is bad the profitability is 100. Which contract would Peter prefer if (1) a=0.5 , (2)a=1 or (3)a=2 .
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