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postnew [5]
3 years ago
13

Option A has an expected value of $2,000, a minimum payoff of -$4,000, and a maximum payoff of $18,000. Option B has an expected

value of $2,200, a minimum payoff of -$1,000, and a maximum payoff of $6,000. Option C has an expected value of $1,900, a minimum payoff of $100, and a maximum payoff of $2,000. In this situation, a risk-averse decision maker would pay __________ for his risk aversion, and a risk-seeking decision maker would pay __________ for his risk seeking.
Business
1 answer:
Alecsey [184]3 years ago
4 0

Answer:

Option A is the answer

Explanation:

A risk-averse decision maker will go for the option with the least chance of loss incurred (the highest minimum payoff of $100) and settle for an expected value of 1900. He'll pay for his risk avoidance in this way (2200-1900 = 300) while a risk-seeking decision maker will go for the option with the highest payoff chances ($18,000), regardless of the possibility of failure. This would make the risk-seeking decision maker go for option A.

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