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a). Would you accept a gamble that offers a 10-percent chance to win \(\$ 95\) and a 90-percent chance to lose \$5?
b). Would you pay \(\$ 5\) to participate in a lottery that offers a 10-percent chance to win \(\$ 100\) and a 90 -percent chance to win nothing?
c). Do the options in a)-b) offer identical outcomes?
a). The great majority of people in the study rejected this proposition as a loser.
b)-c). A large proportion of those who refused the first option accepted the second. But the options offer identical outcomes. As Kahneman and Tversky see it: "Thinking of the \(\$ 5\) as a payment makes the venture more acceptable than thinking of the same amount as a loss." It's all a matter of how the situation is framed in this case, the extent to which people are "risk averse."
in Mathematics by Platinum (129,882 points) | 86 views

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asked May 17, 2020 in Mathematics by MathsGee Platinum (129,882 points) | 108 views
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