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You and I play the following game. I toss a coin and observe the outcome. If it's Tails, I continue tossing, and repeat until the
You and I play the following game. I toss a coin and observe the outcome. If it's Tails, I continue tossing, and repeat until the outcome is Heads. You give me x dollars if you want to play. I give you 1 dollar if the Tails outcome never occurs, 2 dollars if Tails occurs once, and 2n dollars if it occurs n times. Suppose that you are risk-neutral (neither risk seeking, nor risk averse), then for what values of x would you choose to play? Suppose that you are risk averse, then for what values of x would you choose to play?
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