Business Ethics as Rational Choice 1st Edition by John Hooker

Exercise 1

You wish to estimate the utility to you of earning the annual salaries in the left column of Table 3.1. You fix the utility of $10,000 arbitrarily at 15, and the utility of $40,000 arbitrarily at 25. You decide that you are indifferent between (a) receiving a sure salary of Q between $10,000 and $40,000 and (b) taking a chance of receiving $40,000 with probability p and $10,000 with probability 1 ? p , where Q and p are shown in the table. Calculate the utility of salaries $15,000, $20,000, and $30,000.