Investment Example
Jane Dickson wants to construct a utility curve
revealing her preference for money between $0
and $10,000
A utility curve plots the utility value versus the
monetary value
An investment in a bank will result in $5,000
An investment in real estate will result in $0 or
$10,000
Unless there is an 80% chance of getting $10,000
from the real estate deal, Jane would prefer to
have her money in the bank
So if p = 0.80, Jane is indifferent between the bank
or the real estate investment