Suppose there are three individuals. Walt has the utility function U (w) = w Jesse has the utility function U (w) = 2w. Skylar has the utility function U (w) = }w. They all have $10,000 to begin. There are two possible punishment regimes the district attorney in Albuquerque, NM could implement. One one regime (Regime 1) they are caught 1/4 of the time, but pay 6,400 when caught. In another (Regime 2), they pay 3,200 but are caught 1/2 of the time. If you consider Skylar, which punishment gives her lower EU? Also is Skylar is risk loving, risk averse, or risk neutral? (Hint you can use Arrow Pratt Measure of Absolute Risk Aversion or U'(w) -). Regime 1, risk neutral Regime 1. risk loving Regime 1. risk averse Regime 2, risk loving Regime 2, risk averse Regime 2 risk neutral If you consider Jesse, which punishment gives her lower EU? Also is Jesse is risk loving, risk averse, or risk neutral? (Hint you can use Arrow Pratt Measure of Absolute Risk Aversion or U' (W) . Indifferent between regimes, risk neutral Regime 2. risk averse Regime 1, risk averse Regime 1. risk loving Regime 2, risk neutral Regime 2, risk loving Regime 1, risk neutral If you consider Walt, which punishment gives him lower EU? Also is Walt is risk loving, risk averse, or risk neutral? (Hint you can use Arrow Pratt Measure of () Absolute Risk Aversion or -). U' (w) Regime 1, Risk averse Regime 1, risk neutral Regime 1, risk loving Regime 2. risk loving Regime 2, neutral Regime 2, risk adverse