Author Question: The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% ... (Read 721 times)

appyboo · **Reply #30 on:** Jun 18, 2019

The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% chance that it could all be stolen. Bob is risk averse because
◦ he is willing to pay a premium to avoid a risky situation.
◦ he has negative marginal utility of wealth.
◦ his utility function is convex.
◦ All of the above.

okolip · **Reply #31 on:** Jun 18, 2019

he is willing to pay a premium to avoid a risky situation.

appyboo · **Reply #32 on:** Jun 18, 2019

Thanks

okolip · **Reply #33 on:** Jun 18, 2019

Welcome

storky111 · **Reply #34 on:** Jun 18, 2019

The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% chance that it could all be stolen. Bob will buy theft insurance to cover the full $100
◦ as long as it does not cost more than $70.
◦ as long as it does not cost more than $50.
◦ as long as it does not cost more than $25.
◦ at any price.

moormoney · **Reply #35 on:** Jun 18, 2019

as long as it does not cost more than $70.

storky111 · **Reply #36 on:** Jun 18, 2019

The above figure shows Bob's utility function, which is
◦ concave.
◦ L-shaped.
◦ linear.
◦ convex.

joshraies · **Reply #37 on:** Jun 18, 2019

concave.

storky111 · **Reply #38 on:** Jun 18, 2019

Thanks

joshraies · **Reply #39 on:** Jun 18, 2019

Welcome

Author Question: The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% ... (Read 721 times)

appyboo

The above figure shows Bob's utility function. He currently has $100 of wealth, but there is a 50% ...

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