In order to boost funding for the state of florida or, Ask an Expert

Economics

In order to boost funding for the state of Florida or Mississippi, depending on where you are, each state has decided to start a daily drawing where people can purchase a ticket for $1 with a 3-digit number from 000-999. If the number on the ticket matches the number drawn, the person wins $500. Suppose a person is risk neutral, i.e., their utility is linear in income. In this case U=Y. Show that a risk neutral person will never purchase a lottery ticket. Why then do so many people purchase these types of lottery games? (Hint: what is the Expected outcome from the gamble?)

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91561916

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