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2. Loss Aversion and Lottery Probabilities Consider a worker who experiences loss aversion, and l = 2g In other words, the pain from a $1

2. Loss Aversion and Lottery Probabilities

Consider a worker who experiences loss aversion, and l = 2g

In other words, the pain from a $1 loss is two times the pleasure from a $1 gain.

The crime lottery is L = {$30, $30; r1, r2}.

The expected utility of the lottery will be zero if r1 = [_____] and r2 = [_____]. Illustrate.

O'Sullivan, Arthur. Urban Economics (p. 399). McGraw-Hill Higher Education. Kindle Edition.

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