A manager must determine which of two products to market. From market studies the manager constructed the following payoff matrix of the present value of all future net profits under all the different possible states of the economy.
State of the economy Profitability Profit
Product 1
Boom .2 is profitability and $50 the profit.
Normal .5 is profitability and 20 the profit
Recession .3 is profitability and 0 is the profit
Product 2
Boom .2 is profitability and $30 is the profit
Normal .4 is profitability and 20 is the profit
Recession .4 is profitability and 10 is the profit
The manager’s utility for money function is
U=100M-M2
Where M refers to dollars of profit Is the manager a risk seeker, risk neutral, or risk averter? Why?