Let us assume that you are faced with two prospects of winning money: A and B:
Prospect A is a 90% chance of winning $500. Prospect B is a 45% chance of winning $1000.
Prospect theory and the results of research cited in the textbook shows that individuals are more likely to choose which prospect?

Question

Quizplus · Accepted Answer

Prospect theory suggests that individuals are more risk-averse when it comes to gains, meaning they are more likely to choose a sure gain over a risky gain. In this case, Prospect A offers a 90% chance of winning $500, which is a sure gain with a high probability. On the other hand, Prospect B offers a higher potential gain of $1000, but with only a 45% chance of winning, making it a more risky prospect. Therefore, based on Prospect theory, individuals are more likely to choose Prospect A as the safer and more reliable option.

Let Us Assume That You Are Faced with Two Prospects