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Tianyu bought a new smartphone for $1,000. Since he is a careless person, in the next year, there is a 10% chance that he will
Tianyu bought a new smartphone for $1,000. Since he is a careless person, in the next year, there is a 10% chance that he will accidentally trash his phone by dropping it to the ground, in which scenario the phone will be worth $0. Otherwise (with a 90% chance), the phone will be intact. His utility over his uncertain equity value, , can be represented by a utility function () = . Assume that 1) the value of the phone is his payment, $1,000, and will not depreciate over time; 2) Tianyu's decision making process follows the expected utility hypothesis
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