X
Why register?
Welcome to the world's #1 website about management.
 Discover 1000s of knowledge centers.
 Learn from colleagues and experts.
 Share best practices with 1,000,000 members.
 Accelerate your management career.
 100% free.

Game Theory Calculations
Zheng, Student (University), Australia
A person has a utility function defined over her wealth given by
U(w) = ln(w). Her initial wealth is $2 and she faces a risky prospect in which she will lose $1 with a probability of 0.4 and gain $1 with a probability of 0.6.
(i) Show that this person is risk averse by demonstrating that her utility function is concave.
(ii) What is her expected utility of this gamble?
(iii) Find her maximum willingness to pay to avoid taking this risk.




Do you wish to study further? You can learn more from the summary, forum, discussions, lessons, courses, training, instructions, expert tips, best practices and education sources. Register.





Special Interest Group Leader



More on Game Theory






