You are trying to decide between rescuing a puppy or an older dog. You decide to try to assign some numbers to your preferences so you can compare options. You estimate that your utility for a dog that will chew your furniture is 0.1 and your utility for a dog that can go on hikes with you is 0.8. You expect that a puppy will have an 70% chance of chewing your belongings and a 90% chance of going on hikes. What is your expected utility for getting the pup

You are trying to decide between rescuing a puppy or an older dog. You decide to try to assign some numbers to your preferences so you can compare options. You estimate that your utility for a dog that will chew your furniture is 0.1 and your utility for a dog that can go on hikes with you is 0.8. You expect that a puppy will have an 70% chance of chewing your belongings and a 90% chance of going on hikes. What is your expected utility for getting the pup

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.1P

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. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index . There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. a) Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain.
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. Priyanka has an income of £90,000 and is a von Neumann-Morgenstern expected utility maximiser with von Neumann-Morgenstern utility index u(x) √x . There is a 1 % probability that there is flooding damage at her house. The repair of the damage would cost £80,000 which would reduce the income to £10,000. a) Would Priyanka be willing to spend £500 to purchase an insurance policy that would fully insure her against this loss? Explain.
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