Some questions reached me regarding the meaning of "utility over outcomes/wealth": for each of the three persons the utility is over the money in each person's pocket. I.e. if they do not play the lottery, then they all have 25 and evaluate this with their respective utility function. If they do play the lottery, they have 25-what they pay for the lottery+what they get out of the lottery. Since they pay 21 to play the lottery and receive 10 with prob 1/2 and 30 with probability 1/2, they have 14 with prob 1/2 and 34 with prob 1/2.

2. [30 pts] Uncertainty Carla, David, and Eva are oered to participate in the following lottery at a price of p = .621. With equal probability the lottery pays out either 10, or 30. Carla, David and Eva currently have a wealth of 25 each. Carla's utility over outcomes {wealth is given by nob) = while David's utility is given by nD[z) = z; and Eva's utility is given by 113(2) = 3:: + g. (a) Write down the lottery over wealth for each individual. What is the expected value of the lottery? (b) What are Carla's, David's and Eva's risk attitudes (are they risk averse, risk neutral, or risk loving)? Explain your answer. [c] Determine the certainty equivalent of the lottery for each player and explain with the help of the certainty equivalent who will choose to participate in the lottery and who will not. (1) What is the highest possible price that Eva is willing to pay to participate in the lottery? e) What is the highest possible price that Carla is willing to pay to participate in the lottery