Say an individual is faced with the decision of whether to buy home fire insurance or not (Let’s not worry about a world with laws at this time). The states of nature are that no fire occurs (with probability .999) or a fire occurs (with probability .001). Here is the payoff table for the decision maker State of Nature

Sep 8, 2023

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Say an individual is faced with the decision of whether to buy home fire insurance or not (Let’s not worry about a world with laws at this time). The states of nature are that no fire occurs (with probability .999) or a fire occurs (with probability .001). Here is the payoff table for the decision maker State of Nature
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