Lotteries and expected utility A lottery:L=(,…)Y,P20∑P=1 A compound lottery:L=(L1…,lk;a2…a) vka420∑P=1andL=(P2…P) A simplified lottery of (L1,",Lk; a1, ak) sL=a1L+…+ a,l or L=(B3…B) P=aP+…+a,P k See the figLotteries and expected utility • A lottery: • A compound lottery: and . • A simplified lottery of is or See the fig 1 ( , , ) L P P = N 1 , 0 1 N i i i i P P =   =  1 ( , , ) k k L P P k N = 1 1 ( , , ; , ) L L L = k k   1 , 0 1 N k i i k P  =   =  1 1 ( , , ; , ) L Lk k   L L L = + +   1 1 k k 1 ( , ) L P P = k 1 1 k P P P n n k n = + +  