Problem
Let p' be a probability distribution giving prizes $10 and $20 with probabilities 2/3 and 1/3, respectively, and let p be a probability distribution giving prizes $5, $15, and $30 with probabilities 1/3, 5/9 and 1/9, respectively. Show that any risk averse expected utility maximizer will (weakly) prefer p' to p. (Hint: Construct p as a compound lottery as discussed at the end of the subsection on risk aversion.) Can you supply a general statement of the principle at work in this specific example?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.