Kim and Abe participate in a psychology experiment.At the end of the study,they are offered either $10 or a chance to be entered into a drawing where there is a 10 percent chance of winning $100.Kim's parents are supporting her through college,paying her expenses,and giving her a generous allowance.Abe is putting himself through school with jobs and loans.Prospect theory would predict that Kim will choose the _____ and Abe will choose the _____.
A) drawing; $10
B) drawing; drawing
C) $10; $10
D) $10; drawing

Question

Quizplus · Accepted Answer

Prospect theory suggests that individuals who are less financially constrained (like Kim) are more likely to take risks, such as choosing the drawing. In contrast, those who are more financially constrained (like Abe) are likely to prefer the sure thing, such as the $10.

Kim and Abe Participate in a Psychology Experiment