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Suppose the utility function of a decision-maker satisfies ARA(x)=x where x is the amount of current wealth. (a) Does this decision-maker become more or less
Suppose the utility function of a decision-maker satisfies ARA(x)=x where x is the amount of current wealth. (a) Does this decision-maker become more or less risk averse as their wealth increases? More risk averse Less risk averse Their risk aversion likely remains constant. (b) Given the above, when considering insurance, would this decision-maker likely pay more for insurance as their wealth increases, or less? More Less They would likely pay the same
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