Question
Consider a person with the following value function under prospect theory: v ( w ) = w .0.3 if w 0 =-2(- w .)0.3 if
Consider a person with the following value function under prospect theory:
v(w) = w.0.3 if w 0
=-2(-w.)0.3 if w < 0
Assume that this individual weight values by probabilities, instead of using the prospect theory weighting function. What is the value of the following prospect?
P1 (0.5, 1000, -800)
Take answer out to 3 decimal places
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Price theory and applications
Authors: Steven E landsburg
8th edition
538746459, 1133008321, 780538746458, 9781133008323, 978-0538746458
