Marsha Owns a Boat That Is Harbored on the East

question 147

Essay

Marsha owns a boat that is harbored on the east coast of the United States. Currently, there is a hurricane that is approaching her harbor. If the hurricane strikes her harbor, her wealth will be diminished by the value of her boat, as it will be destroyed. The value of her boat is $250,000. It would cost Marsha $15,000 to move the boat to a harbor out of the path of the hurricane. Marsha's utility of wealth function is U(w) =
. Marsha's current wealth is $3 million including the value of the boat. Past evidence has influenced Marsha to believe that the hurricane will likely miss her harbor, and so she plans not to move her boat. Suppose the probability the hurricane will strike Marsha's harbor is 0.7. Calculate Marsha's expected utility given that she will not move her boat. Calculate Marsha's expected utility if she moves her boat. Which of the two options gives Marsha the highest expected utility?

---

Definitions:

African Figurative Sculpture

Sculptural art from Africa that represents human or animal figures, reflecting the continent's diverse cultures and artistic traditions.

Mediator

An individual or party that facilitates communication and negotiation between conflicting parties to help them reach an agreement or resolve a dispute.

Olowe of Ise

A celebrated Yoruba artist from Nigeria, renowned for his innovative and dynamic sculptures, particularly in wood.

Woodcarved Reliefs

Artistic techniques where designs are carved into a flat wooden surface, leaving the images raised up from the background, typically used for decorative purposes.