5. Three decision makers have assessed utilities for the following decision problem (payoffin dollars):State of NatureDecision Alternative55d₁d25280$1$2$350-20100-100The indifference probabilities are as follows:Indifference Probability (p)☐PayoffDecision Maker A1001.00800.95500.90200.70-200.50-1000.00Decision Maker B1.000.700.600.450.250.00a.Plot the utility function for money for each decision maker.Decision Maker C1.000.900.750.600.400.00b. Classify each decision maker as a risk avoider, a risk taker, or risk neutral.C.For the payoff of 20, what is the premium that the risk avoider will pay to avoid risk?What is the premium that the risk taker will pay to have the opportunity of the highpayoff?

(a) Indifference Probabilities The utility function U(x)U(x)U(x) can be derived using the…

Answered: 5. Three decision makers have assessed…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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