Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-Suppose the insurance company cannot tell them apart but expects them to be different values and charges them an average premium of $1850.Who is more likely to buy this insurance?
A)Samantha
B)Nadia
C)Both of them
D)None of them

Question

​Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-​Suppose the insurance company cannot tell them apart but expects them to be different values and charges them an average premium of $1850.Who is more likely to buy this insurance?
A)​Samantha
B)Nadia
C)Both of them
D)​None of them

Quizplus · Accepted Answer

Samantha is more likely to buy the insurance because the premium is closer to her expected loss ($2,500) plus $100, making it a better deal for her compared to Nadia, whose expected loss is only $1,000 plus $100.

​Use the Following Setup for Question

Use the Following Setup for Question