Risk and gambling, Microeconomics

John has a utility function given by U(M) = M0.5, where M represents an amount of cash prize in a game. If John wins, with the probability of 0.2, he will get $900; otherwise, he gets only $100 when he loses. Alternatively, he can accept a lump-sum amount of cash prize to avoid the game. Calculate the minimum amount that he is willing to accept. How much is the risk premium? Graphically explain your answer.
Posted Date: 12/9/2012 8:36:41 AM | Location : Hong Kong







Related Discussions:- Risk and gambling, Assignment Help, Ask Question on Risk and gambling, Get Answer, Expert's Help, Risk and gambling Discussions

Write discussion on Risk and gambling
Your posts are moderated
Related Questions
what are the properties of cob-douglas production function

net preparation ranjna baghel

why is normal rate of return on capital included in the total cost and what implication does it have

Deviation - Difference between the expected and actual payoff -  Adjusting for the negative numbers -  The standard deviation measures square root of average of squa

What are the possible advantages of free trade? Firms a)  Specialisation and enhanced use of comparative advantage b)  Possibility of advantages of scale c)  Spread

function with equation,variable,parameter

Marginal rate of technical substitution in the theory of production is similar to the concept of marginal rate of substituent to in the indifference curve analysis of consumer dema

merits and demerits of international trade

The Healthy Spring Water company sells bottled water for offices / homes. The price of the water is $20 per 10 gallon bottle and the company currently sells 2,000 bottles per day.