Clancy has $4800. He plans to bet on a boxing match between Sullivan and Flanagan. He finds that he can buy coupons for $6 that will pay off $10 each if Sullivan wins. He also finds in another store some coupons that will pay off $10 if Flanagan wins. The Flanagan tickets cost $4 each. Clancy believes that the two fighters each have a probability of ½ of winning. Clancy is a risk averter who tries to maximize the expected value of the natural log of his wealth. Which of the following strategies would maximize his expected utility? (a) Don’t Gamble (b) Buy 400 S tickets and 600 F tickets (c) Buy exactly as many F tickets and S tickets

Clancy has $4800. He plans to bet on a boxing match between Sullivan and Flanagan. He finds that he can buy coupons for $6 that will pay off $10 each if Sullivan wins. He also finds in another store some coupons that will pay off $10 if Flanagan wins. The Flanagan tickets cost $4 each. Clancy believes that the two fighters each have a probability of ½ of winning. Clancy is a risk averter who tries to maximize the expected value of the natural log of his wealth. Which of the following strategies would maximize his expected utility? (a) Don’t Gamble (b) Buy 400 S tickets and 600 F tickets (c) Buy exactly as many F tickets and S tickets

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 17.5IP

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