Results 1 to 2 of 2

Math Help - Expected utility.

  1. #1
    Member
    Joined
    Dec 2009
    Posts
    96

    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?
    Express your answer as a dollar amount with a positive or negative sign in front (e.g. +$10 or -$12.95).

    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?
    Express your answer as a dollar amount with a positive or negative sign in front (e.g. +$10 or -$12.95).

    ANY AND ALL HELP IS MUCH APPRECIATED!!!
    Last edited by mr fantastic; May 1st 2010 at 08:45 PM. Reason: Deleted email address, re-titled.
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor
    Joined
    Aug 2007
    From
    USA
    Posts
    3,110
    Thanks
    2
    Ummm... I hate to break this too you, but you must define a "Utility" function in order to answer these quesitons. If you are talking about "Expectation", that is the same as a utility function U(t) = t. This means that $1 when you have none is just as important to you as $1 when you already have $1,000,000.

    In the first one, your expectation is -$10.00 + (1/30)*($300), or, a maybe little less confusing (29/30)*(-$10.00) + (1/30)(+$290.00). Again, though, we can't really talk about "Utility" until we know the Utility Function.

    And just for the record, there are subjects worse than Statistics. Statistics is FUN!
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Replies: 1
    Last Post: May 12th 2011, 09:22 AM
  2. Expected Value and Utility - Simple yet very confusing
    Posted in the Advanced Statistics Forum
    Replies: 3
    Last Post: February 20th 2011, 04:33 PM
  3. Replies: 3
    Last Post: October 31st 2009, 08:32 AM
  4. Stats/Econ help -- Expected Utility Calculation
    Posted in the Business Math Forum
    Replies: 4
    Last Post: October 5th 2008, 03:20 PM
  5. Could someone check my answer. expected value a utility
    Posted in the Advanced Statistics Forum
    Replies: 0
    Last Post: February 6th 2008, 04:30 PM

Search Tags


/mathhelpforum @mathhelpforum