Business, 26.11.2019 05:31 funmi5504

Consider a market of risk averse decision makers, each with a utility function u=√i each decision maker has an income of $90,000, but faces the possibility of a catastrophic loss of $50,000 in income. each decision maker can purchase an insurance policy that fully compensates her for her loss. this insurance policy has a cost of $5,900. suppose each decision maker potentially has a different probability p of experiencing the loss. a. what is the smallest value of p so that a decision maker purchases insurance? show your work. b. what would happen to this smallest value of p if the insurance company were to raise the insurance premium from $5,900 to $27,500?

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Consider a market of risk averse decision makers, each with a utility function u=√i each decision ma...

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