puts him out of work. In the evente of a sirious injury, Manualls annual income falls to $$200,000.$

Suppose thwe is a $25\%$ chance that he will suffic a seritus injury.

For Mariual, the annual expoctod value of loat inceme due to injuries is

The following table shows Manuel's total ulifity at virious l$$vels of income.

When Manuells inceme rises from $$200,000$ to $$300,000,$ his adcitional, or marqinal, utily from the $$100,600$ increase is

utis, and

utis.

Manud's utihty function exhitils

of inctitse adds

to utilty than main his income is relatively hi$$h $($$$500,000).$

This is an example of an actuarially

insurance policy.

Income in Different States of the Warld

$($Deallars$)$

$($DoWara$)$

Expected Incorthe

$($Dellars$)$

Seriaus Injury

$0\mathrm{.}75$ prabability

$25$ probability

Expected Utility

$($utibs$)$

No Injuries

wilhoul intirarion

Whe insurance