ECON 851 Final: ECON851 FinalSummer2014Solution
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Instructions: this is closed book, closed notes exam, no calculators of any kind are allowed, show all the calculations, if you need more space, use the back of the page, fully label all graphs. Suppose that the vnm utility function u is quadratic, i. e. 2 x xu ( v. , which describes the same preferences as u. bx. Prove that there exists a mean-variance utility function xue. Here we used the fact that: (5 points). Suppose that colin has eut preferences with vnm utility function. )(xu xv and cassidy has eut preferences with vnm utility function. , both sides must have the same sign. ) if and only if colin weakly prefers xue. Since lottery a over lottery b (i. e. 0 b xue. A lottery a over lottery b (i. e. 1: (5 points). Suppose that maria has vnm utility function xu. Raymond has vnm utility function averse than maria. xv.
