When the decision maker prefers a guaranteed payoff value that is smaller than the expected value of the lottery,the decision maker is a(n)
A)risk avoider.
B)risk taker.
C)optimist.
D)optimizer.

Question

Quizplus · Accepted Answer

A risk avoider is someone who would rather settle for a guaranteed payoff amount, even if it is smaller than the expected value of a lottery, in order to avoid the risk of uncertain outcomes. This decision-making behavior is in contrast to a risk-taker who prefers to gamble on uncertain outcomes and potentially win big. Optimism and optimization are not necessarily related to risk preferences, so choices C) and D) are incorrect.

When the Decision Maker Prefers a Guaranteed Payoff Value That