You have a log utility, U = In(W), where W is your wealth. Currently, you own $1,000. You are given the chance to receive a payment of $918 with a probability of 56%. Given the Expected Utility Theory, how much certainty payment would make you indifferent between taking a chance and taking the certainty payment? Enter a number with two decimal points. Answer the question in dollar amount, i.e., if the answer is $20, enter 20.00. (Note: whenever the calculation involves log and exponential operations, it is wise to keep more decimals in your intermediary steps so that your final two-decimal answer is accurate.)

You have a log utility, U = In(W), where W is your wealth. Currently, you own $1,000. You are given the chance to receive a payment of $918 with a probability of 56%. Given the Expected Utility Theory, how much certainty payment would make you indifferent between taking a chance and taking the certainty payment? Enter a number with two decimal points. Answer the question in dollar amount, i.e., if the answer is $20, enter 20.00. (Note: whenever the calculation involves log and exponential operations, it is wise to keep more decimals in your intermediary steps so that your final two-decimal answer is accurate.)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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