Regina and Brenda are considering playing a game called Matching Twenties.In this game,Regina and Brenda will each place a $20 bill on the table.Both players will then toss a fair coin.If both Regina and Brenda toss heads or both Regina and Brenda toss tails,Regina wins the $40 on the table.If one woman tosses heads and the other tosses tails,Brenda wins the $40 on the table.
Regina decides that she is not willing to play this game because a loss of $20 to Brenda would cause her to lose more utility than she would gain if she won $20 from Brenda.Which concept best explains Regina's choice not to play the game?
A) hedonic editing
B) gain aversion
C) prospect theory
D) signaling
E) gain-loss asymmetry

Question

Quizplus · Accepted Answer

Prospect theory explains Regina's choice not to play the game because it describes how people value gains and losses differently, leading to decisions that deviate from expected utility theory. Regina values the potential loss of $20 more negatively than the potential gain of $20, which is a key concept in prospect theory.

Regina and Brenda Are Considering Playing a Game Called Matching