Question: (a) Suppose that Eiseb utility function is U M and his initial wealth is 360. Will he accept a gamble in which he win 130

(a) Suppose that Eiseb utility function is U M and his initial wealth is 360. Will he accept a gamble in which he win 130 with probability 2/3 and lose 110 with probability 1/3? (5) (b) Why is it intuitively plausible to assume that most people are risk averse? (5) (c) Why must a signal between potential adversaries be difficult to fake? (5) (d) How does statistical discrimination affect average insurance premium paid by members of different groups?

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Subjective norms, i.e. the norms of the target group

The temporal rule: The closer temporal proximity we have to an event or action, the more probable it is that the distortion of information is less than if the event or action happened longer ago.

The relevance of the information to the interpreter