Calculate john reservation price

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Reference no: EM13154566

Suppose that John's preferences for wages and risk (a bad) are given by the utility function: U = W x e-R where e represents the exponential function, W is the weekly wage, and R represents the type of job. R = 0 if the job is safe and R = 1 if the job is dangerous. Suppose that the safe job pays $287 per week.

a. Will John take a dangerous job if he is offered $500 per week? Why or why not?

b. Calculate John's reservation price.

Reference no: EM13154566

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