Your non-profit has just been awarded a special government environmental clean- up grant of $90,000. You are given the choice to take the $90,000 now or wait until next year. With an election coming up, the amount of next year's grant will vary based on which party wins. Assuming that money tomorrow is worth the same as money today, the grant amounts are: Outcome Democrats control everything Republicans control everything Split government Grant Amount $160,000 $36,100 $90,000 Probability 0.25 0.25 0.50 Assume: Assume your Payoff in each case (based on your utility function) is sqrt (grant amount). Question: Do you accept the Money today or wait until next year? Include Calculations of the Expected Value and Expected Utility.
Your non-profit has just been awarded a special government environmental clean- up grant of $90,000. You are given the choice to take the $90,000 now or wait until next year. With an election coming up, the amount of next year's grant will vary based on which party wins. Assuming that money tomorrow is worth the same as money today, the grant amounts are: Outcome Democrats control everything Republicans control everything Split government Grant Amount $160,000 $36,100 $90,000 Probability 0.25 0.25 0.50 Assume: Assume your Payoff in each case (based on your utility function) is sqrt (grant amount). Question: Do you accept the Money today or wait until next year? Include Calculations of the Expected Value and Expected Utility.
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
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