The effort of carrying an umbrella reduces my utility by 1/2 a unit. If it rains and I have no umbrella, my utility falls by 3 units, whilst it only falls by 1 unit if I do have an umbrella. I consider that the probability it will rain is 1/2.Therefore I carry an umbrella.

Question

Quizplus · Accepted Answer

Since the probability of rain is 1/2 and the loss of utility without an umbrella in the rain is greater than with an umbrella, carrying an umbrella increases overall utility. The small reduction in utility from carrying the umbrella is outweighed by the benefit of avoiding the greater loss in utility without it. Thus, the decision to carry an umbrella is rational.

The Effort of Carrying an Umbrella Reduces My Utility by 1/2