Assume that a decision maker’s current wealth is 10,000. Assign u(0) = – 1 and u(10,000) = 0 When facing a loss of X with probability 0.5 and remaining at current wealth with probability 0.5, the decision maker would be willing to pay up to G for complete insurance. The values for X and G in three situations are given below. X c 10 000 6 000 61100 3 300 3 300 1 700 Determine three values on the decision maker’s utility of wealth function u. Calculate the slopes of the four line segments joining the five points determined on the graph u(w). Determine the rates of change of the slopes from segment to segment. Put yourself in the role of a decision maker with wealth 10,000. In addition to the given values of u(0) and u(10,000), elicit three additional values on your utility of wealth function u. On the basis of the five values of your utility function, calculate the slopes and the rates of change of the slopes as done in part (b).
Assume that a decision maker's current wealth is 10,000. Assign u(0) = - 1 and u(10,000) = 0 When facing a loss of X with probability 0.5 and remaining at…