Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy. They have three policies to choose from, A, B and C. The policies differ with respect to price, coverage and ease of billing. The company has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.
-A "risk averse" decision maker assigns the ____ relative utility to any payoff but has a(n) ____ marginal utility for increased payoffs.
A) largest; increasing
B) largest; diminishing
C) smallest; diminishing
D) smallest; increasing

Question

Exhibit 14.8
The following questions use the information below.
A company needs to buy a new insurance policy. They have three policies to choose from, A, B and C. The policies differ with respect to price, coverage and ease of billing. The company has developed the following AHP tables for price and summary. The other tables are not shown due to space limitations.  
-A "risk averse" decision maker assigns the ____ relative utility to any payoff but has a(n) ____ marginal utility for increased payoffs.
A) largest; increasing 
B) largest; diminishing 
C) smallest; diminishing 
D) smallest; increasing

Quizplus · Accepted Answer

Risk-averse decision makers assign the largest relative utility to any given payoff but experience diminishing marginal utility for increased payoffs, meaning each additional unit of payoff brings them less utility than the previous one.

Exhibit 14.8 The Following Questions Use the Information Below