If Alan is risk-averse,then he will always
A)choose not to play a game where he has a 50 percent chance of winning $5 and a 50 percent chance of losing $5.
B)choose not to play a game where he has a 75 percent chance of winning $5 and a 25 percent chance of losing $5.
C)choose to play a game where he has a 55 percent chance of winning $5 and a 45 percent chance of losing $5.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Alan is risk-averse, which means he prefers certainty over uncertainty. Option A gives him an equal chance of winning or losing, so he would choose not to play. Option B has a higher chance of winning but also a chance of losing, so Alan would also avoid this game. Option C has a slightly higher chance of winning but still has a chance of losing, so Alan would not choose to play this game either. Therefore, the best choice for Alan would be to avoid playing any of the games, as shown in option A.

If Alan Is Risk-Averse,then He Will Always