... than EMV not to accept the gamble. If indifference curves are drawn for these three attitudes to risk - as below - the degrees of risk averse or loving can be shown by their distance from the straight (risk neutral) line. Indifference Curves for Money and Probability of Risk As far as a risk averse individual's preferences concerning a fair bet are concerned it has already been stated that he will not accept, since he wishes to avoid 'unnecessary' gambles. This can be proven mathematically as well as by ad hoc methods by means of an example. If an individual is offered a fair gambles, with a 50-50 chance of winning or losing, but with gamble A offering the chance to win (or lose) £x. It can be seen that for gamble A, the EMV is £0, since: EMV = (p)x + (1 - p)y p = probability winning the gamble 1 - p = probability not winning the ...

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