Course Solutions Uncategorized 1411 Even Without Formal Assessment Process Often Possible Learn Something Individual S Ut Q34242610

1411 Even Without Formal Assessment Process Often Possible Learn Something Individual S Ut Q34242610

14.11 Even without a formal assessment process, it often is possible to learn something about an individuals utility function just through the preferences revealed by choice behavior. Two persons, A and B, make the following bet: A wins $40 if it rains tomorrow and B wins $10 if it does not rain tomorrow. a If they both agree that the probability of rain tomorrow is 0.10, what can you say about their utility functions? b If they both agree that the probability of rain tomorrow is 0.30, what can you say c Given no information about their probabilities, is it possible that their utility functions d If they both agree that the probability of rain tomorrow is 0.20, could both individuals about their utility functions? could be identical? be risk-averse? Is it possible that their utility functions could be identical? Explain.

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