2.8 Suppose that an individual is risk averse and has to choose between $100 with certainty and...

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2.8 Suppose that an individual is risk averse and has to choose between $100 with certainty and a risky option with two equally likely outcomes: +100 - x and +100 + x. Use a graph (or math) to show that this person’s risk premium is smaller, the smaller x is (the less variable the gamble is).

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Managerial Economics And Strategy

ISBN: 9780135640944

2nd Global Edition

Authors: Jeffrey M. Perloff, James A. Brander

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