1.Is expected utility theory of any practical relevance? Why or why not?

2.Prospect theory involves introducing several new "parameters" into the expected utility model of choice. Does this constitute "over-fitting"? How might we ensure that we don't accept Prospect Theory over expected utility simply because introducing new parameters always leads to a better model fit?

3.A common behavior of gamblers, at casinos or at horse tracks for example, is that they make large bets at the end of the day. How can you explain this with prospect theory?

4.The model of Prospect Theory doesn't specify what the reference point is or even what attributes of utility might be reference dependent. Scientifically speaking, why is this omission a weakness of the Prospect Theory model? What do you think are three things that influence the reference point, depending on the situation?