#1

This is a long shot, but can any intelligent UG'ers come up with a solution to this?

Jack loves good food and has £100 to spend. Due to an unusual ailment he has a probability of ¼ of losing his sense of smell, which would greatly reduce his enjoyment of food. Jack has found an insurance company that will sell him insurance where he gets £3x if he loses his sense of smell and he pays £x if he does not. Note that x need not be positive. If his expected utility function is U(cs,cns) = .75 (cs)0.5 + .25(cns)0.5/2, where cs is his consumption if he retains his sense of smell and cns is his consumption if he does not, how much insurance should he buy? Interpret your answer.

And in case people jump down my throat, I've been working on it for over an hour, have consulted all my notes, textbook, trawled the internet and consulted with my flatmate. So I've tried

Jack loves good food and has £100 to spend. Due to an unusual ailment he has a probability of ¼ of losing his sense of smell, which would greatly reduce his enjoyment of food. Jack has found an insurance company that will sell him insurance where he gets £3x if he loses his sense of smell and he pays £x if he does not. Note that x need not be positive. If his expected utility function is U(cs,cns) = .75 (cs)0.5 + .25(cns)0.5/2, where cs is his consumption if he retains his sense of smell and cns is his consumption if he does not, how much insurance should he buy? Interpret your answer.

And in case people jump down my throat, I've been working on it for over an hour, have consulted all my notes, textbook, trawled the internet and consulted with my flatmate. So I've tried

#2

it looked like maths but then it changed... sorry buddy.

edit: i guess it still is maths, but i have no idea what the letters in the function mean.

edit: i guess it still is maths, but i have no idea what the letters in the function mean.

#3

wow, i need to learn some economics

#4

divide by zero?

Im havin difficulty understanding the question

Im havin difficulty understanding the question

#5

My mum will be able to help you

when she gets home in about 20 minutes.....

when she gets home in about 20 minutes.....

#6

This seems to me like a system of differential equations. Too lazy to do it plus the last calculus class I took was 2 years ago.

Probably have to use Laplace.

Probably have to use Laplace.

*Last edited by MustangSVT at Oct 9, 2008,*

#7

Well, thanks everyone for giving it a bash...kind of.