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Suppose you have two choices for your yearly salary: L1 and L2. They both are drawn from a uniform distribution: L1 U [150000, 180000] and
Suppose you have two choices for your yearly salary: L1 and L2. They both are drawn from a uniform distribution: L1 U [150000, 180000] and L2 U [160000, 170000].
(a) Draw cumulative distribution functions for both lotteries on one graph. Label completely.
(b) Which one would a risk averse individual prefer? Or will they be indifferent between the two? Why or why not? Explain your answer in detail. Use integral condition.
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