Asked by Pavlog Pawluk on Jun 28, 2024
Verified
Jill is a risk-averse expected-utility maximizer.Jack offers her the following bet: he will toss a coin and pay her $5 if it comes down heads,but if it comes down tails,Jill will have to pay him $5.Even though heads and tails are equally likely,Jill will not take the bet.
Risk-Averse
A description of an individual or organization that prefers to avoid uncertainty and is willing to sacrifice some potential gain to avoid risk.
Expected-Utility Maximizer
An economic concept referring to an individual who chooses between uncertain prospects by comparing their expected utilities.
Bet
A wager or gamble where an individual risks a certain amount of money or valuables on the outcome of an uncertain event.
- Appreciate the economic justification for risk aversion and its repercussions for insurance marketplaces.
Verified Answer
Learning Objectives
- Appreciate the economic justification for risk aversion and its repercussions for insurance marketplaces.
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