Question
A business owner is trying to decide whether to buy, rent, or lease office space in an environment where the states of nature describe business
A business owner is trying to decide whether to buy, rent, or lease office space in an environment where the states of nature describe business conditions as either brisk or slow. The payoffs are in the above nearby table. If the probability of brisk business is .40 and for slow business is .60, and if the highest and lowest payoffs have utility 10 and 0, respectively, and if payoffs 70, 60, 55 and 40 have indifference probabilities .5, .4, .3, and .1, respectively, then which decision maker is
A. risk neutral
B. risk loving
C. risk averse
Business condition brisk Business condition slow
Buy 90 -10 (minus 10)
Rent 70 40
Lease 60 55
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