Kay has a set of jewellery consisting of pendant and earrings. Each piece of jewellery is worth $1,000 and the set is worth $2,000. She wants to send it to her sister, Helen, in Toronto. While she can send them free of charge, she is concerned about the safety of shipping them. She believes that the probability that the jewellery is lost in transit is 0.1. Both Kay and Helen are risk averse characterized by utility function, u(M )=sqrt M , where M is their wealth levels.
a) Suppose Kay decides to send the two pieces of jewellery together. Compute Helen’s expected
utility and illustrate your answer on a carefully labelled diagram.
b) Suppose that, in the event a single shipment is lost, this event would be independent of the outcome of any other shipment. Should Kay send the two pieces of jewellery together or separately? Explain your answer.
c) Suppose that Kay can purchase an insurance policy that reimburses her the full value in the event that the shipment is lost. What is her reservation price of this insurance policy? With an option of the insurance, does Kay choose to send her jewellery together or separately?
Kay has a set of jewellery consisting of pendant and earrings. Each piece of jewellery is worth $...
Using the book, write another paragraph or two: write 170 words: Q: Compare the assumptions of physician-centered and collaborative communication. How is the caregiver’s role different in each model? How is the patient’s role different? Answer: Physical-centered communication involves the specialists taking control of the conversation. They decide on the topics of discussion and when to end the process. The patient responds to the issues raised by the caregiver and acts accordingly. On the other hand, Collaborative communication involves a...