Question: 1. Describe the new risks facing society today. Give examples of risks in electronic commerce.
2. Given the utility function u(W) = W- vW and initial endowment of $100
|
Outcome (Probability)
|
Payoff Lottery 1
|
Payoff Lottery 2
|
Payoff Lottery 3
|
|
H(0.50)
|
5
|
9
|
8
|
|
T(0.50)
|
-2
|
-5
|
-3
|
a. Calculate the expected payoff of each lottery.
b. Rank the three lotteries according to the expected dollar winnings.
c. Calculate the expected utility of each lottery.
d. Rank the three lotteries according to the expected utility.