Site icon EssaysPrompt

5. Let there be a bet, B, such that the probability of winning x is p and the pr

5. Let there be a bet, B, such that the probability of winning x is p and the probability of winning y is 1-p. The bet is NOT necessarily fair. Show that if an individual is risk averse at all income levels then EU(taking the bet B) < u(I+EV(B)) i.e. a risk averse individual always prefers receiving the expected value of a bet that taking the bet itself.

"Get 15% discount on your first 3 orders with us"
Use the following coupon
"FIRST15"

Order Now
Exit mobile version