Question
Lanier, Guido and Ali are facing a difficult choice. All of them have to make a choice between the following two options: Option 1: get
Lanier, Guido and Ali are facing a difficult choice. All of them have to make a choice between the following two options:
Option 1: get $5000 bonus for sure
Option 2: a gamble that yields $8000 or $2500 with equal probabilities.
Lanier is risk neutral. Guido has utility function U(x)=-e-0.0001x and Ali is more risk averse than Guido, but we do not know his utility function. Which of the following is true?
A. Lanier will choose option 1. Guido will choose option 1. Ali will choose option 2.
B. Lanier will choose option 1. Guido will choose option 1. We do not have enough information to determine Alis choice.
C. Lanier will choose option 1. Guido will choose option 1. Ali will choose option 1.
D. Lanier will choose option 1. Guido will choose option 2. Ali will choose option 2.
E. Lanier will choose option 1. Guido will choose option 2. We do not have enough information to determine Alis choice.
F. Lanier will choose option 1. Guido will choose option 2. Ali will choose option 1.
G. Lanier will choose option 2. Guido will choose option 2. Ali will choose option 2.
H. Lanier will choose option 2. Guido will choose option 2. We do not have enough information to determine Alis choice.
I. Lanier will choose option 2. Guido will choose option 2. Ali will choose option 1.
J. Lanier will choose option 2. Guido will choose option 1. Ali will choose option 2.
K. Lanier will choose option 2. Guido will choose option 1. We do not have enough information to determine Alis choice.
L. Lanier will choose option 2. Guido will choose option 1. Ali will choose option 1.
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