In an experiment on risk aversion and inconsistency, a group of people were given the option to accept or reject the following gamble: 50% chance to win $150, 50% chance to lose $100.Which of the following scenarios is most accurate and would most likely occur?
A)A majority accepted the gamble.People who chose the gamble can expect to gain from it.
B)A majority rejected the gamble.People who chose the gamble can expect to gain from it.
C)A majority accepted the gamble.People who chose the gamble can expect to lose from it.
D)A majority rejected the gamble.People who chose the gamble can expect to lose from it.
E)People were evenly split between accepting and rejecting the gamble.Expected winnings from the gamble are zero.

Question

Quizplus · Accepted Answer

The expected value of the gamble is positive: (0.5 * $150) - (0.5 * $100) = $25. However, due to risk aversion, a majority might still reject the gamble to avoid the potential loss of $100.

In an Experiment on Risk Aversion and Inconsistency, a Group