Consider two identical fishermen with utility functions U(x)= x/2, where x is the number of fish caught. Assume that the probability of either fisherman catching a fish is .05 and that it is impossible for either of them to catch more than one fish. What is one fisherman's expected utility from fishing alone?
A)0.05
B)0.025
C)0.5
D)1.0

Question

Quizplus · Accepted Answer

The expected value for catching a fish is 0.05(1) = 0.05, and the expected utility is U(1) = 1/2. Therefore, the expected utility for fishing alone is 0.05(1/2) = 0.025. 
Since it is impossible to catch more than one fish, the best choice for the fisherman is to fish alone and hope to catch the one fish with an expected utility of 0.025.

Consider Two Identical Fishermen with Utility Functions U(x)= X/2, Where