Making high-stakes insurance decisions. The Journal of Economic Psychology (Sept. 2008) published a study on high-stakes insurance decisions. In part A of the experiment, 84 subjects were informed of the hazards (both fire and theft) of owning a valuable painting, but were not told the exact probabilities of the hazards occurring. The subjects then provided an amount they were willing to pay

(WTP) for insuring the painting. In part B of the experiment, these same subjects were informed of the exact probabilities of the hazards (fire and theft) of owning a valuable sculpture. The subjects then provided a WTP amount for insuring the sculpture. The researchers were interested in comparing the mean WTP amounts for the painting and the sculpture.

a. Explain why the experimental design employed is a randomized block design.

b. Identify the dependent (response) variable, treatments, and blocks for the design.

c. Give the null and alternative hypotheses of interest to the researchers.