Ask Experts Questions for FREE Help !
    Sammuel Murphy's Avatar
    Sammuel Murphy Posts: 1, Reputation: 1
    New Member

    Nov 2, 2016, 08:43 AM
    Finding the optimal probability

    My question is regarding insurance policies where, alpha is the probability that an accident will happen and (1-alpha) is the probability it will not. The question is to find a probability alpha(min) where if the probability is greater than alpha(min) then the consumer chooses policy 1 for insurance. If alpha is lower than alpha(min) then the consumer chooses policy 2 for insurance. Given that the utility function is U=W^(1/2) where W is wealth.

    I began by trying to solve by graphing the utility function and looking for the point where the probabilities intersect with the utility function but that got me no where. Although this is a proof, I am not quite sure where to begin and needed some guidance where I should start

Check out some similar questions!

Probability of finding oil [ 1 Answers ]

high quality oil = .50 medium quality oil = .20 no oil = .30 what is the probability of finding oil?

Finding Probability [ 2 Answers ]

I understand the basics of probability but I need help with the following? 1. What is the probability that when 2 numbered cubes are thrown that at least 1 will land with the number 6 up? Why is the answer 11/36? 2. What is the probability that when 3 spinners with the numbers 1-3 are...

Finding Probability [ 1 Answers ]

The personnel roster for a large manufacturing company indicates that 25% of the employees have MBAs and 40% have undergraduate liberal arts degrees. In addition 55% have either an MBA or an undergraduate liberal arts degree. What is the probability that a randomly selected employee has both an...

Finding the probability of. [ 4 Answers ]

I am having trouble finding the probability that 2 mushroom jellyfish will be selected if I am going to draw 2 jellyfish, without replacement, from a tank that contains 5 mushroom jellyfish and 3 cannonball jellyfish. Can anyone help me with this question?

Finding the probability [ 2 Answers ]

Assume that male and female births are equally likely and that the birth of any child does not affect the probability of the gender of any other children. Find the probability of at most three boys in ten births. Please help me I don't get it.

View more questions Search

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.