A risk-neutral agent will

Question

Quizplus · Accepted Answer

A risk-neutral agent is indifferent to a "fair gamble" because they only care about the expected value of the outcome, not the risk or uncertainty involved. Therefore, they would be willing to take a fair gamble because the potential payoff is worth the risk, but they would also be willing to reject it if they found a better option with higher expected value. However, they would never accept a gamble with a negative expected value because it would result in a net loss for them over time.

A Risk-Neutral Agent Will