Yes. That wasn’t the best word choice; maybe “group” would have been better. I meant groups of people who are willing to take some level of risk. Imagine the categories are “low risk takers”, “medium risk takers”, and “high risk takers”.
Compared to A paying out $40, if you make B $50-n you’ll only get the high risk takers choosing B. If you make it $70-n you’ll get high and medium risk takers. If you make it $120-n you’ll get almost everybody.
If risk taking is a value between 0 and 1, the categories are groups of people inside certain intervals. For example, low could be [0, 1/3), medium could be [1/3, 2/3), and high could be [2/3, 1].
Can you explain what this part means? What do you mean by category here?
Yes. That wasn’t the best word choice; maybe “group” would have been better. I meant groups of people who are willing to take some level of risk. Imagine the categories are “low risk takers”, “medium risk takers”, and “high risk takers”.
Compared to A paying out $40, if you make B $50-n you’ll only get the high risk takers choosing B. If you make it $70-n you’ll get high and medium risk takers. If you make it $120-n you’ll get almost everybody.
If risk taking is a value between 0 and 1, the categories are groups of people inside certain intervals. For example, low could be [0, 1/3), medium could be [1/3, 2/3), and high could be [2/3, 1].