Jill is a risk-averse expected-utility maximizer.Jack offers her the following bet: he will toss a coin and pay her $5 if it comes down heads,but if it comes down tails,Jill will have to pay him $5.Even though heads and tails are equally likely,Jill will not take the bet.

Risk-Averse

A description of an individual or organization that prefers to avoid uncertainty and is willing to sacrifice some potential gain to avoid risk.

Expected-Utility Maximizer

An economic concept referring to an individual who chooses between uncertain prospects by comparing their expected utilities.

Bet

A wager or gamble where an individual risks a certain amount of money or valuables on the outcome of an uncertain event.