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Consider a person with utility function given by U = V5W-1000. Suppose that the market-based contract offered to this person
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Answer #1
Utility in a market based contract
Wealth Utility Probability
25000 352.14 0.50
75000 611.56 0.50
Total expected utility 481.85
Annual fixed salary would be 46635.09 (481.85^2 + 1000)/5
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