題組內容

四、Both Gigi and Helen maximize the expected utility, with a (Bernoulli) utility function $u(x) = \ln x$, wherex is the amount of money they can enjoy. Each of them has an initial wealth $10, but may suffer from an accident that occurs with probability 1/4.

3._________ (3%) Suppose that Helen will suffer a higher loss, $4 (while Gigi's damages of accident remain at $2). If Irene proposes the following arrangement: Gigi gives Helen $a > 0 if there is no accident, and Helen gives Gigi $b > 0 if the accident occurs. Will this kind of arrangement Pareto dominate no insurance?