Prospect Z = ($2 , 0.25 ; $17 , 0.50 ; $24 , 0.25) If Anna's utility of wealth function is given by u(x)=x, what is the value of EU(Z) for Anna? (I

Clancy has difficulty finding parking in his neighborhood and, thus, is considering the gamble of illegally parking on the sidewalk because of the opportunity cost of the time he spends searching for parking. On any given day, Clancy knows he may or may not get a ticket, but he also expects that if he were to do it every day, the average amount he would pay for parking tickets should converge to the expected value. If the expected value is positive, then in the long run, it will be optimal for him to park on the sidewalk and occasionally pay the tickets in exchange for the benefits of not searching for parking. Suppose that Clancy knows that the fine for parking this way is $100, and his opportunity cost (OC) of searching for parking is $20 per day. That is, if he parks on the sidewalk and does not get a ticket, he gets a positive payoff worth $20; if he does get a ticket, he ends up with a payoff of

Suppose that you discount the future hyperbolically. Assume that both B and 6 are strictly greater than zero but strictly smaller than one. At t= 0, you are given the choice between the following three options: a (1 utile at t = 0), b (2 utiles at t= 1), and c (3 utiles at t = 2). As a matter of fact, at t = 0 you are indifferent between a and b and between b and c. (a) Compute B and 6. (b) Suppose, in addition, that at t= 0 you are indifferent between cand d (xutiles at t = 3). What is x?

Suppose Alex’s utility function is u ($x) = √x. Assume her initial wealth is 0. Is it possible that Alex’s expected utility from the prospect equals $5, why? What is the possible range of Alex’s expected utility?