Bob's farm harvests corns worth 106 thousand dollars (and nothing else). In each year, there is a 24% chance that a storm will attack and leaves him with only 26 thousand dollars worth of the corns. Bob's preferences over wealth are represented by U = In w . What is the maximum that Bob is willing to pay for full insurance (in unit of thousand dollars)? (Round answers to 2 decimal places).

Bob's farm harvests corns worth 106 thousand dollars (and nothing else). In each year, there is a 24% chance that a storm will attack and leaves him with only 26 thousand dollars worth of the corns. Bob's preferences over wealth are represented by U = In w . What is the maximum that Bob is willing to pay for full insurance (in unit of thousand dollars)? (Round answers to 2 decimal places).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.5P

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