Simba is a street vendor downtown Nairobi who sells roasted maize during the month of May. Simba has $0 wealth and he makes $10 (~1000 Kshs) when it rains, but he makes $38 (~3850 Kshs) if it does not rain. Simba’s utility function is given by U(C)=C2, and the probability of rain is 50%.
Which of the following describes Simba’s risk preferences?
Simba is risk averse
Simba is risk neutral
Simba is risk loving
None of the above
