Question: Define option value. Suppose that a public project is increasing the risk faced by farmers, but the expected income of each farmer does not depend

Define option value. Suppose that a public project is increasing the risk faced by farmers, but the expected income of each farmer does not depend on whether the project is undertaken or not. Let farmer A be risk averse and farmer B be risk neutral. Compare their option values.

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2. Find out if there are other reference points that can be used as reasonable alternatives.

1. Identify your reference point when making a decision based on an element of risk.

3. If there are reasonable alternatives, think about your decisions based on the different reference points and see if there are any contradictions in the decisions.