When Jeff bought a house he also bought homeowners insurance, but when he bought a new dishwasher he refused to buy the repair insurance policy the store offered. Assuming Jeff is rational in his choices, which of the following is the most likely cause of his behavior?
A. The expected loss from dishwasher failure is less than the insurance premium and he can afford to absorb smaller losses.
B. The probability of his house burning is greater than the probability a dishwasher failure.
C. He switches back and forth between risk averse and risk loving preferences.
D. He doesn't trust appliance insurers because they have no agent to relate to.
Answer: A
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