Question
Consider a person with the following value function under prospect theory: v ( w ) = w .0.5 if w 0 =-2(- w )0.5 if
Consider a person with the following value function under prospect theory:
v(w) =w.0.5ifw0
=-2(-w)0.5 ifw< 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)
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Principles Of Corporate Finance
Authors: Lawrence J. Gitman, Sean M. Hennessey
2nd Canadian Edition
0321452933, 978-0321452931
