Assume Brandon's benefit function for water is and he consumes water both in droughts,W_D and in the rainy season,W_R.Assume his water bundle is W_D = 36 and W_R = 25 and the probability of drought is 0.75.Expected water consumption is A) 33.25 B) 61 C) 30.5 D) 27

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Quizplus · Accepted Answer

To find the expected water consumption, we need to calculate the average benefit of water consumption in both drought and rainy seasons, weighted by the probability of each season occurring. Expected benefit of W_D = (0.75)*(11*36^(-0.5)) = 21.69 Expected benefit of W_R = (0.25)*(11*25^(-0.5)) = 6.66 Total expected benefit = 21.69 + 6.66 = 28.35 Therefore, the expected water consumption is (28.35/11)^2 = 8.24 gallons. Since the W_D bundle provides 36 gallons of water and the W_R bundle provides 25 gallons of water, the best choice for Brandon is to choose W_D, which gives him a higher expected water consumption.

Assume Brandon's Benefit Function for Water Is and He