Class 17: Risk and Expected Utility

Textbook reading: Kreps, Chapter 18, “The Expected-Utility Model.” Sections 18.1, 18.3, and 18.4 are the core; read 18.5 for the ways real people depart from the model. Where Kreps uses the exponential utility function, we use square roots; the ideas are identical. Chapter 19 is skipped, though Q51 borrows its central idea.

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