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The decision maker ranks lotteries according to the utility function
(i) State the independence assumption. Does this decision maker satisfy it?
(ii) Is this decision maker risk averse? Does she satisfy decreasing risk aversion?
(iii) The decision maker has wealth w > 500 and is just indi?erent between accepting and rejecting a lottery that gives her an equal chance of winning 1000 and losing 500. What is the wealth of the decision maker?
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Random Sampling Method In this method the units are selected in such a way that every item in the whole universe has an equal chance of being included. In the words of croxton
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(a) If one solves the ordinary differential equation using Euler's method find an expression for the local truncation error. (b) Using the result of (a) above what will
solve problems
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