Exponential utility has an adjustable parameter called risk tolerance.The risk tolerance parameter measures
A)how much money the decision maker has to spend.
B)the decision maker's attitude toward risk.
C)how much risk there is in a given decision.
D)the probability of an unfavorable outcome.

Question

Quizplus · Accepted Answer

The risk tolerance parameter in exponential utility functions measures the decision maker's attitude toward risk, indicating how willing they are to accept risk in pursuit of higher rewards.

Exponential Utility Has an Adjustable Parameter Called Risk Tolerance