A decision maker with a logarithmic w-curve is interested in purchasing a deal that provides a 50/50 chance of receiving either $100 or 0. His PIBP for this deal is $30. a. What is the value of his...

A decision maker with a logarithmic w-curve is interested in purchasing a deal that provides a 50/50 chance of receiving either $100 or 0. His PIBP for this deal is $30.

a. What is the value of his initial wealth, vr?

b. If a decision maker with an exponential w-curve had the same certain equivalent for this deal, what is the value of his risk tolerance?

c. Plot a sensitivity analysis of the buying price to the initial wealth from w = $5 to vr = $ 10,000.

d. What is the buying price of the deal ifthe initial wealth is $1,000, $2,000, $4,000, $10,000?

e. Does the buying increase or decrease with wealth? Compare to an exponential decision maker.