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Suppose a decision maker has wealth w0, and CRRA utility for wealth, i.e. () = 1 1 for > 1 and () = ln() if
Suppose a decision maker has wealth w0, and CRRA utility for wealth, i.e. () = 1 1\ for > 1 and () = ln() if = 1. Suppose that the decision maker decides whether to buy insurance for her phone that replaces the phone in case of it breaks. If the phone breaks and she does not have insurance, the repair will cost 500. The probability of her phone breaks is .05. Let 0 = 1000. If her phone breaks and she has insurance, the insurance will replace the phone for free. Suppose the insurance costs 200. i. Suppose = 1. Will the decision maker buy insurance
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