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Mike is risk averse. He could work in a company where he would get a fixed wage of (60,000. Instead, he decides to accept a
Mike is risk averse. He could work in a company where he would get a fixed wage of (60,000. Instead, he decides to accept a different job offering a fixed wage of 658,000 and a bonus which depends on performance. He knows that the bonus will be worth 64,000 with a probability of 75% and 61,000 with a probability of 25%. Which statement is correct? This story is not consistent. Given his risk aversion, his decision is not rational. This story is consistent. His decision can be rational despite his risk aversion
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