Assume Kim has a utility function u(c) = c. Is he risk averse, risk loving or ri

Question

Assume Kim has a utility function u(c) = c. Is he risk averse, risk loving or risk neutral? Plot his utility function on a graph. Would he accept the following bet: We flip a fair coin, if it is Heads he gets $1. if it is Tails he pays 1$? Assume Sally has a utility function u(c) = c. Is she risk averse, risk loving or risk neutral? Plot her utility function on a graph Assume her current wealth is 100$. Would she take the following bet: We flip a fair coin. if it is Heads she gets S10. if it is Tails she pays 10$? Explain why or why not.

Explanation / Answer

The rule is u(c)= c^n 0

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