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u(Q) = [u(Q1) - pu(Q2)] / (1 - p)

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u(Q) = [u(Q1) - pu(Q2)] / (1 - p)

u(Q1) = (1 - p) u(Q) + pu(Q2)

Solving for u(Q), you get

u(Q) = [u(Q1) - pu(Q2)] / (1 - p)

= [u(10,000) - (1/3)u(40,000)] / (1 - 1/3)

= [15 - (1/3)(25)] / (2/3) = 10

Is this correct?

solving equations

asked Apr 5, 2013 in Statistics Answers by anonymous

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