According to prospect theory, would a person rather gamble $2.00 with the possibility of winning $4.00, or gamble 50 cents with the possibility of winning $1.00? Why?
A) $2.00 because they could possibly win a greater amount of money
B) $2.00 because they will ignore the possibility of losing more money
C) 50 cents because they can only lose a small amount of money
D) 50 cents because they will not mind only being able to win a little money

Question

Quizplus · Accepted Answer

According to prospect theory, people value gains and losses differently, and are risk-averse when it comes to gains but risk-seeking when it comes to losses. In this scenario, the option to gamble 50 cents with the possibility of winning $1.00 is considered a gain, and people tend to be risk-averse when it comes to gains. Therefore, they would prefer the option with a smaller potential gain but also a smaller potential loss.

According to Prospect Theory, Would a Person Rather Gamble $2