You are on Deal or No Deal and are facing 3 boxes.One box contains $1,000,000, one contains $1,000, and one contains $10.(If you haven't seen the show, all this means is that there is a one-third chance you will win $1,000,000; a one-third chance you will win$1,000; and a one-third chance you will win $10.)The dealer offers you $250,000 if you give up your right to open the boxes.

(a)If your utility isx and you act to maximize expected utility, do you take the deal?

(b)Ifyourutilityisx andyouacttomaximizeexpectedutility, what is the lowest amount in exchange for which you would give up the right to open the boxes.

(c)Now, suppose you have the following value function (x) ={x/2, if x02|x| if x

(d)Suppose your reference point is the expected value if you do not take the deal.Do you take the deal?

1. You are on Deal or No Deal and are facing 3 boxes. One box contains $1,000,000, one contains $1,000, and one contains $10. (If you haven't seen the show, all this means is that there is a one-third chance you will win $1,000,000; a one-third chance you will win$1,000; and a one-third chance you will win $10.) The dealer offers you $250,000 if you give up your right to open the boxes. (a) If your utility is vr and you act to maximize expected utility, do you take the deal? (b) If your utility is va and you act to maximize expected utility, what is the lowest amount in exchange for which you would give up the right to open the boxes. (c) Now, suppose you have the following value function if x 2 0 v(x) = VI / 2, -2vr if: