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  3. 1 jane is on a game show called walk roll...

Question: 1 jane is on a game show called walk roll...

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1. Jane is on a game show called Walk, Roll or Flip. She has the choice between taking a certain S50 (Walk) or taking one of the following two gambles: (i) she rolls a six sided dice twice and receives $300 if the same number faces up each time, $900 if the sum of the two numbers facing up is 3, S450 if the sum of the two numbers is 8, and $0 otherwise. (ii) she flips a fair coin 4 times and receives $100 if the same side of the coin appears in each of the four flips, $25 if heads appears 3 times and tails appears once, and SO otherwise. Suppose Janes utility function is U(M)-M05, where M is her winnings on the game show. (a) Which of her three options will Jane choose? (b) If Jane were risk neutral, which of her three options would she choose?

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