1) Two tennis players have reached the final of a tournament. The prize money fo
ID: 1115527 • Letter: 1
Question
1) Two tennis players have reached the final of a tournament. The prize money for the winner is S80K; the loser gets nothing. Player A has offered player B an agreement to split the prize money fifty-fifty, regardless of who wins Player A's utility from money income w is uA = 2Vw, and player B's utility from money income is uB w 100 a. Denote player A's probability of winning by q (both players agree on the value of q). On the state space (0,40K,80K), what is the lottery that A gets if there is no agreement? What is the lottery if B accepts A's proposal to split? b. On the event space (A wins, B wins), what is the act (in the Savage expected utility framework) from A's perspective if they do not agree? What is it if they agree? c. Which, if any, of the players is more risk-averse (calculate their coefficients of absolute risk-aversion)? d. If the players choose lotteries that maximize their expected utility, what is A's maximum probability of winning so that A has an interest in the advance split of the prize money? And what is A's minimum probability of winning so that B will agree?Explanation / Answer
A) if there is a no agreement then we'll get a lottery of 80k and if we accept the proposal of a to split then the lottery what a will get is 40k.
B) in case of this situation if they don't agree the probability of getting 80k is half and 0 also but if they agree they will get at least 40k .
C) 0.01
D) maximumprobability of A : 0.8
Minimum probability : 0.2
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