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Consider a person with the following value function under prospect theory v w w5 if

Consider a person with the following value function under prospect theory:
v(w) = w.5 if w 0
=-2(-w).5 if w
a. Is this individual loss averse? Explain
b. Assume that this individual weights values by probabilities, instead of using prospect theory weighting function. Which of the following prospects would be preferred?
P1(.8, 1000, -800)
P2(.7, 1200, -600)
P3(.5, 2000,-1000)

 

May 14 2020 View more View Less

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