Example The student's preference for option B over option A implies that his expected utility from B,is greater than his expected utility from A: E[U(B)]≥E[U(A)] U(525o)20.5U(500)+0.5U(50) In this case,even though the expected values of both options are equal,the student prefers the certain payout over the less certain one. This student is acting in a risk-averse manner over the choices available. Bhattacharya,Hyde and Tu-HealthEconomics Bhattacharya, Hyde and Tu – Health Economics Example  The student’s preference for option B over option A implies that his expected utility from B, is greater than his expected utility from A: E[U(B)] ≥ E[U(A)] U($250) ≥ 0.5 U($500) + 0.5 U($0)  In this case, even though the expected values of both options are equal, the student prefers the certain payout over the less certain one.  This student is acting in a risk-averse manner over the choices available