Representation of a Lottery in Economics
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Questions and Answers

What does the set X represent?

  • A set of all possible outcomes of a lottery
  • A set of worst to best outcomes of a prospect
  • A set of probability distributions for a gamble
  • A set of all possible wealth levels of an agent (correct)

    • What is the condition for the probabilities of a lottery?

  • ∑𝑖𝑖=1 𝑛𝑛 𝑝𝑝𝑖𝑖 = 1 (correct)
  • ∑𝑖𝑖=1 𝑛𝑛 𝑝𝑝𝑖𝑖 ≤ 0
  • ∑𝑖𝑖=1 𝑛𝑛 𝑝𝑝𝑖𝑖 < 1
  • ∑𝑖𝑖=1 𝑛𝑛 𝑝𝑝𝑖𝑖 > 1

    • What is the notation for a lottery?

  • 𝐿𝐿 = (𝑥𝑥1, 𝑝𝑝1; 𝑥𝑥2, 𝑝𝑝2; …. ; 𝑥𝑥𝑛𝑛, 𝑝𝑝𝑛𝑛/2)
  • 𝐿𝐿 = (𝑥𝑥1, 𝑝𝑝1; 𝑥𝑥2, 𝑝𝑝2; …. ; 𝑥𝑥𝑛𝑛, 𝑝𝑝𝑛𝑛) (correct)
  • 𝐿𝐿 = (𝑥𝑥1, 𝑝𝑝1; 𝑥𝑥2, 𝑝𝑝2; …. ; 𝑥𝑥𝑛𝑛, 𝑝𝑝𝑛𝑛+1)
  • 𝐿𝐿 = (𝑥𝑥1, 𝑝𝑝1; 𝑥𝑥2, 𝑝𝑝2; …. ; 𝑥𝑥𝑛𝑛, 𝑝𝑝𝑛𝑛-1)

    • What is the ordering of the outcomes in the set X?

    <p>From worst to best</p> Signup and view all the answers

    What is the relationship between the outcomes in the set X?

    <p>𝑥𝑥1 &lt; 𝑥𝑥2 &lt; ⋯ &lt; 𝑥𝑥𝑛𝑛</p> Signup and view all the answers

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