Pattie-lynns utility function, Applied Statistics

Pattie-Lynn's utility function for total assets is,

1378_Pattie-Lynns utility function.png

in which A represents total assets in thousands of dollars.

(a) Graph Pattie-Lynn's utility function. How would you classify her attitude toward risk?

(b) If Patty-Lynn's total assets are currently $10,000, should a bet in which she will win $10,000 with probability 0.6 and lose $10,000 with probability 0.4 appear favorable?

(c) If Patty-Lynn's total assets are currently $90,000, should the bet given in (b) appear favorable?

(d) Compare your answers to (b) and (c) . Does Patty-Lynn's betting behavior seem reasonable to you? How could you intuitively explain such behavior?

Using a sequence of simple lotteries (two or three will suffice), assess your own utility function over the range [-$10,000, +$100,000].  Show the lotteries you use, and plot the results.

Faced with a simple lottery with a 0.75 probability of winning $1000 and a 0.25 probability of losing $4000, what is your expected utility for the lottery?

Posted Date: 2/22/2013 1:21:11 AM | Location : United States







Related Discussions:- Pattie-lynns utility function, Assignment Help, Ask Question on Pattie-lynns utility function, Get Answer, Expert's Help, Pattie-lynns utility function Discussions

Write discussion on Pattie-lynns utility function
Your posts are moderated
Related Questions
Modify your formulas from (1) to compute the price at time 0 of an American put option with the same contract speci cations in the binomial model. Report the price of the American

You are a business analyst working for a company called Combined Computers Pty Ltd. You have been asked to prepare a business report with statistics in it for the managing director

Statistical Keys To do statistical operations we must first set the calculator on SD mode [SD stands for "standard deviation" which is the usual st

Suppose that before the minimum wage law change, the underlying mean number of part-time employees per Burger King Restaurant in New Jersey was 20.3. It was thought that the increa

10. If a set of scores has a sample mean of 25 and a sample variance of 4, find the following: a. the z-score for a raw score of 31 b. the z-score for a raw score of 18 c. the raw

CERTIFICATE OF AIRWORTHINESS FOR EXPORT When aircraft manufacturers go into series production of a new type of aircraft, then obviously they are hopeful of world wide sales. Sim

Correlation Analysis Correlation Analysis is performed to measure the degree of association between two variables. The measure is called coefficient of correlation. The coeffic

What statistics can be obtained from a circulatory lab?

Normal 0 false false false EN-US X-NONE X-NONE

Active Control Equivalence Studies (ACES) Clinical trials the field in which the object is easy to show that the new treatment is  as good as the existing treatment. Such type