# Expected utility.

• May 1st 2010, 07:23 PM
KarlosK
Expected utility.
This is the subject from Hell!!! I am pretty lost and posting under my brothers account...

any help and clarity would be greatly appreciated!!!

3.

Thirty people work in your office and your Christmas tradition is to have a pool to which everyone contributes \$10. On December 20, there is a drawing and the winner takes all. What is the expected utility of your participating in the office pool?

4.

If for your Christmas party, the winner is expected to buy refreshments for everyone (average cost \$5 each), what is your expected utility for participating?
[Same cost, \$10, same number of people participating, 30, same winner take all rule].

7.

What is the expected utility of buying a lottery ticket for \$5 in a fair lottery if the prize is \$1,000,000 and there are 10 million tickets sold?
Express your answer as a plus or minus dollar amount, with two decimal points. (e.g., +\$3.25 or -\$3.25)
8.

You have just bought a new and therefore fairly expensive car. You have to buy insurance. The insurance cost is \$1000 for a year but the deductible is only \$150. If we assume that the probability of your having an accident in the next year is 10% and that the average cost of an accident involving a car like yours is \$5000, what is the expected utilty for you of buying insurance?

9.

You have just bought a new and therefore fairly expensive car. You have to buy insurance. The insurance cost is \$1000 for a year but the deductible is only \$150. If we assume that the probability of your having an accident in the next year is 10% and that the average cost of an accident involving a car like yours is \$5000, what is the expected utilty for you of NOT buying insurance and driving without it?