Consider the following compound lottery, described in words: "The probability that the price of copper increases tomorrow is objectively determined to be 0.5. If it increases, then tomorrow I will flip a coin to determine a monetary payout that you will receive: if the flip is Heads, you win $100, while if it is Tails, you win $50. If it does not increase, then I will roll a 10-sided die (assume each side is equally likely to be rolled). If the die roll is a 4 or lower, you will win $100. If it is a 5, then you will win $200, and if it is a 6 or greater, you will win $50." Fill in the blanks below for the reduced lottery that corresponds to this compound lottery (write in decimals). R= ( , $50; , $100; , $200)

Consider the following compound lottery, described in words: "The probability that the price of copper increases tomorrow is objectively determined to be 0.5. If it increases, then tomorrow I will flip a coin to determine a monetary payout that you will receive: if the flip is Heads, you win $100, while if it is Tails, you win $50. If it does not increase, then I will roll a 10-sided die (assume each side is equally likely to be rolled). If the die roll is a 4 or lower, you will win $100. If it is a 5, then you will win $200, and if it is a 6 or greater, you will win $50." Fill in the blanks below for the reduced lottery that corresponds to this compound lottery (write in decimals). R= ( , $50; , $100; , $200)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.8P

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