DSE 2013

[marth]

How can analysis expected utility maximizer as it came in DSE 2013
how can A will prefer prefer this lottery with these options

[Sris]

expected waelth is she doesnt buy lottery =100 =>expected utility= 10 rootover 100=100

If she buys that lottery, her expected Utility= 10root49*(1-p)+10root400*p ...(let this be equation 1)

since she is an expected utility maximizer she will buy when (1)  is >100

equating i get p>3/13=51/221


in the case where the lottery pays zero...she will be expected to be left with 100(the amt she initially had) minus 51(cost of buying the lottery)=49

in the case where lottery pays her something...she is expected to have 100-51+351=400

[marth]

thanking you