A consumer has utility u(x)=x^ms and a base wealth of 100k she is about to take part in a gamble that will give her 10k bringing her to 110k if a fair die rolls less than 3 (probablity 1/3), but will cost her 5k leaving her with 95k otherwise
- What is the certainty equivalent of participating in this gamble?
- How much would she be willing to pay to not have to take this gamble?