Question

Suppose Xavier has tickets to the Super Bowl, but is terribly ill with a noncontagious infection....

Suppose Xavier has tickets to the Super Bowl, but is terribly ill with a noncontagious infection. How would a decision maker perform his economic calculation on whether to attend the game, based on the traditional model of risk behavior?

Homework Answers

Answer #1

According to the traditional model of risk behavior, the normal human likes to take risks. The ticket to the Super Bowl might have costed some amount to Xavier and if he does not attend then he is at a loss as he would not only lose his money but also lose the potential of gaining some level of satisfaction and utility.  As we know that traditional risk theory states that Xavier  should maximize his utility based on a rigid calculation of expected value. This reason that he would choose to take the risk of attending is due to the "noncontagious" nature of illness.

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