The city of Solvang in California is considering two new policies to curb the future spread of COVID-19. One policy would implement rigorous vaccine requirements for all citizens and implement strict lockdown procedures if a new variant emerges ("highly regulated"). The second policy would not have required lockdown procedures and would have a less regulated vaccine policy ("less regulated"). Under there current COVID-19 management plan, the city spends $400 thousands per in COVID-19 related expenses. Under the highly regulated plan, the city will have to spend $245 thousand enforcing their plan, regardless of what occurs. Under this plan, the city believes there is a 25% chance in the next year that a new, more contagious variant of COVID-19 will emerge. If this new virus emerges, they will implement lockdown procedures. They believe that these lockdown procedures will be highly effective 60% of the time, requiring only an additional $10 thousand in expenses. They also believe that this lockdown plan will only be mildly effective 30% of the time, costing and additional $40 thousand in expenses. The remaining lockdown time they believe will be ineffective, resulting in an additional $640 thousand in expenses. If no new variant emerges, the city believes they will only need to spend an additional $100 thousand. Under the less regulated plan, the city with have to spend $20 enforcing their loose vaccination policy, regardless of what occurs. However, the city still believes there is a 25% chance that in the next year a new, more contagious variant of COVID-19 will emerge. If this new variant emerges, they will need to spend an additional $900 thousand in COVID-19 related expenses. If the new variant does not emerge, they will only need to spend an additional $100. Guiding Questions: What are the expected outcomes of each of these policies given the risk? Are either of these plans better than the status quo COVID-19 strategy? What would you recommend Solvang do being a risk neutral individual? If you were extremely risk averse, would that influence the strategy you took, why?