You have to accept one of the following bets 1 win 200 with

You have to accept one of the following bets:

1) win $200 with probability of 0.5, lose $200 with probability of 0.5

2) win $200 with probability of 3/4, lose $600 with probability of 1/4

3) win $200 with probability of 0.9, lose $1800 with probability of 0.1

Graph each bet on a utility-of-income curve. Which bet us preffered?

Solution