Consider the decision matrix below. You know that your...

Consider the decision matrix below. You know that your marginal utility of money is decreasing, but you don't know by how much. (a) Suppose that you are indifferent between Option 1 and Option 2 . What can you conclude about your subjective probability for the two states? (b) Suppose that you strictly prefer Option 1 to Option 2. What can you conclude about your subjective probability for State 1, as compared to State 2 ? (c) Suppose that the $$\$ 100$$ outcome is replaced with a black box with unknown contents, and that you feel indifferent between the two options. What can you conclude about your subjective probability for States 1 and 2? $$ \begin{array}{lcr} \hline & \text { State 1 } & \text { State 2 } \\ \hline \text { Option 1 } & \$ 100 & 0 \\ \text { Option 2 } & 0 & \$ 100 \\ \hline \end{array} $$

Consider the decision matrix below. You know that your marginal utility of money is decreasing, but you don't know by how much.
(a) Suppose that you are indifferent between Option 1 and Option 2 . What can you conclude about your subjective probability for the two states?
(b) Suppose that you strictly prefer Option 1 to Option 2. What can you conclude about your subjective probability for State 1, as compared to State 2 ?
(c) Suppose that the $$\$ 100$$ outcome is replaced with a black box with unknown contents, and that you feel indifferent between the two options. What can you conclude about your subjective probability for States 1 and 2?
$$
\begin{array}{lcr}
\hline & \text { State 1 } & \text { State 2 } \\
\hline \text { Option 1 } & \$ 100 & 0 \\
\text { Option 2 } & 0 & \$ 100 \\
\hline
\end{array}
$$

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