Let us assume that you are faced with two prospects of losing money: A and B. Prospect A is a 90% chance of losing $500. Prospect B is a 45% chance of losing $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 people tend to prefer risks when facing losses. In this case, Prospect B represents a riskier option with a lower probability of loss (45% chance of losing $1000) compared to Prospect A (90% chance of losing $500). Therefore, individuals are more likely to choose Prospect B, as they prefer to take a risk to potentially avoid a loss altogether.

Let Us Assume That You Are Faced with Two Prospects