How do you think respondents in a laboratory experiment would decide in Decision 1 and Decision 2?  most participants will choose 1B and 2C most participants will choose 1A most participants will choose 1B and 2D most participants will choose 1A and 2D  2) Which of the following can explain the behavior in the lab for decision 1? preference for certainty underestimation of large probabilities individuals are risk loving in the loss domain overweighting of small probabilities concavity of the value function in the gain domain 2. individuals are risk loving in the loss domain

Practical Management Science
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Author:WINSTON, Wayne L.
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Imagine that you have the following pair of concurrent decisions. First examine both decisions, then indicate the options you prefer.

Decision 1: Choose between
A a sure loss of 1500
B a 75% to lose £2000 and 25% chance to lose nothing

Decision 2: Choose between
C a sure gain of £480
D a 25% chance to gain £2000 and 75% chance to gain nothing

How do you think respondents in a laboratory experiment would decide in Decision 1 and Decision 2? 
most participants will choose 1B and 2C

most participants will choose 1A

most participants will choose 1B and 2D

most participants will choose 1A and 2D 

2)

Which of the following can explain the behavior in the lab for decision 1?
preference for certainty

underestimation of large probabilities

individuals are risk loving in the loss domain

overweighting of small probabilities

concavity of the value function in the gain domain 2. individuals are risk loving in the loss domain

 

 

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