When dealing with individual behaviour in risky situations which of the following assumptions concerns the way in which individuals choose between prospects having the same two outcomes but different probabilities?
A)the transitivity assumption
B)the ordering assumption
C)the continuity assumption
D)the substitution assumption

Question

Quizplus · Accepted Answer

The ordering assumption concerns the way in which individuals rank or order different prospects based on their expected outcomes and probabilities. It assumes that individuals have a consistent and stable preference order when choosing between prospects with the same two outcomes but different probabilities. This assumption is important in decision-making and risk assessment, as it helps understand how individuals evaluate and compare different options in uncertain situations. The other assumptions (transitivity, continuity, and substitution) refer to different aspects of individual behaviour in risky situations, such as consistency, smoothness, and trade-offs between risk and reward.

When Dealing with Individual Behaviour in Risky Situations Which of the Following