2. Explain the following phenomena using properties of Kahneman and Tversky's prospect theory as we've discussed it in class. Carefully state what is being evaluated, what is the reference point, what property of prospect theory explains the phenomenon, and why that property explains it. (a) Gamblers tend to bet more recklessly with money they have just won (and more generally, people tend to more easily spend money acquired easily or unexpectedly). This is commonly referred to as the "house money effect." (b) When some stores started introducing charges for credit card transactions, credit card companies lobbied hard to have stores call the credit card price the regular price and the difference a "cash rebate," rather than call the cash price the regular price and the difference a "credit card surcharge." (c) In many contracts for services (such as cell-phone contracts), different features of the service are separated out in great detail, yet the price of the service is subsumed in a single relatively large payment. (d) The fact we talked about in class on horserace betting (that betting on longshots increases toward the end of the day, especially in the last race). (e) Can you explain the phenomena described under (d) with a second different property of prospect theory? 2. Explain the following phenomena using properties of Kahneman and Tversky's prospect theory as we've discussed it in class. Carefully state what is being evaluated, what is the reference point, what property of prospect theory explains the phenomenon, and why that property explains it. (a) Gamblers tend to bet more recklessly with money they have just won (and more generally, people tend to more easily spend money acquired easily or unexpectedly). This is commonly referred to as the "house money effect." (b) When some stores started introducing charges for credit card transactions, credit card companies lobbied hard to have stores call the credit card price the regular price and the difference a "cash rebate," rather than call the cash price the regular price and the difference a "credit card surcharge." (c) In many contracts for services (such as cell-phone contracts), different features of the service are separated out in great detail, yet the price of the service is subsumed in a single relatively large payment. (d) The fact we talked about in class on horserace betting (that betting on longshots increases toward the end of the day, especially in the last race). (e) Can you explain the phenomena described under (d) with a second different property of prospect theory