Expected utility without insurance Lottery scenario similar to case of insurance customer She gains a high income IH if healthy,and low income Is if sick. Uncertainty about which outcome will happen, though she knows the probability of becoming sick is p Expected utility E[U(I)]is: E[U(0)]=pU(s)+(1-p)U(IH) Bhattacharya,Hyde and Tu-HealthEconomicsBhattacharya, Hyde and Tu – Health Economics Expected utility without insurance  Lottery scenario similar to case of insurance customer  She gains a high income IH if healthy, and low income IS if sick.  Uncertainty about which outcome will happen, though she knows the probability of becoming sick is p  Expected utility E[U(I)] is: E[U(I)] = p U(IS ) + (1- p) U(IH )