Consider a lottery L which gives wealth with probability p and wealth y with probability 1 - p. Suppose an individual A with Bernoulli utility function u prefers L to the sure outcome wo. Show that an in dividual B with Bernoulli utility function who is less risk-averse than A also prefers to the sure outcome wo.

Consider a lottery L which gives wealth with probability p and wealth y with probability 1 - p. Suppose an individual A with Bernoulli utility function u prefers L to the sure outcome wo. Show that an in dividual B with Bernoulli utility function who is less risk-averse than A also prefers to the sure outcome wo.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.1P

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