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College Algebra
10th Edition
ISBN:9781337282291
Author:Ron Larson
Publisher:Ron Larson
Chapter8: Sequences, Series,and Probability
Section8.6: Counting Principles
Problem 74E: Lottery Powerball is a lottery game that is operated by the Multi-State Lottery Association and is...
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Consider an agent choosing between the following two lotteries. In the first lottery, a fair coin
is tossed once. If it comes up heads, the agent wins 2 dollars. If it comes up tails, the agent
loses 2 dollars. In the second lottery, the coin is tossed twice. For each head that comes up,
the agent wins 1 dollar. For each tail that comes up, she loses 1 dollar. Show that a risk
averse agent will always prefer the second lottery.
Transcribed Image Text:Consider an agent choosing between the following two lotteries. In the first lottery, a fair coin is tossed once. If it comes up heads, the agent wins 2 dollars. If it comes up tails, the agent loses 2 dollars. In the second lottery, the coin is tossed twice. For each head that comes up, the agent wins 1 dollar. For each tail that comes up, she loses 1 dollar. Show that a risk averse agent will always prefer the second lottery.
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