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Both Nadia and Samantha are applying to insure their car against theft. Nadia lives in a secure neighborhood, where the probability of theft is 10%.
Both Nadia and Samantha are applying to insure their car against theft. Nadia lives in a secure neighborhood, where the probability of theft is 10%. Samantha lives in a less secure neighborhood where the probability of theft is 25%. Both Nadia and Samantha own cars worth $10,000, and are willing to pay $100 over their expected loss for insurance. Suppose the insurance company cannot tell them apart but expects them to have different values and charges them an average premium of $1850. Who is more likely to buy this insurance? Will this lead to a profit or a loss for the firm in expectation? O Samantha; loss O Nadia; loss O Both of them; profit O Samantha; profit
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