<Table> <Tr> <Td> </Td> <Td> This article needs additional citations for verification . Please help improve this article by adding citations to reliable sources . Unsourced material may be challenged and removed . (December 2010) (Learn how and when to remove this template message) </Td> </Tr> </Table> <Tr> <Td> </Td> <Td> This article needs additional citations for verification . Please help improve this article by adding citations to reliable sources . Unsourced material may be challenged and removed . (December 2010) (Learn how and when to remove this template message) </Td> </Tr> <P> In economics and finance, risk neutral preferences are preferences that are neither risk averse nor risk seeking . A risk neutral party's decisions are not affected by the degree of uncertainty in a set of outcomes, so a risk neutral party is indifferent between choices with equal expected payoffs even if one choice is riskier . For example, if offered either $50 or a 50% chance each of $100 and $0, a risk neutral person would have no preference . In contrast, a risk averse person would prefer the first offer, while a risk seeking person would prefer the second . </P> <P> In the context of the theory of the firm, a risk neutral firm facing risk about the market price of its product, and caring only about profit, would maximize the expected value of its profit (with respect to its choices of labor input usage, output produced, etc .). But a risk averse firm in the same environment would typically take a more cautious approach . </P>

What does it mean to be risk neutral