1. Suppose your happiness is given by a Kahneman-Tversky value function like the one shown in the diagram.

You have decided to put the most favorable spin on the various combinations of events that occur in your life. For each of the following pairs of events, will you be happier if you consider their effects separately or if you first combine them and consider only their net effect?

a. A gain of $500 and a loss of $50.

b. A gain of $50 and a loss of $500.

c. A gain of $500 and a gain of $600.

d. A loss of $500 and a loss of $600.

Transcribed Image Text:

Losses V(L) Value V(G) Gains