Problem 3. Recall the Allais paradox from lecture. Question 1: ($1,1) or ($1,089; $5,010; $0,001) Question 2:

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Problem 3. Recall the Allais paradox from lecture. Question 1: ($1,1) or ($1,089; $5,010; $0,001) Question 2: ($1,011; $0,089) or ($5,010; $0,030) Most people prefer the rst lottery in Question 1 but the second lottery in Question 2. Suppose someone chooses according to prospect theory with value function 9:"'1 iszD v($)= 2x ifz

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Problem 3. Recall the Allais paradox from lecture. Question 1: ($1,1) or ($1,089; $5,010; $0,001) Question 2:

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