Consider a person with the following value function under prospect theory: v(w) = w.5 when w > 0.
Consider a person with the following value function under prospect theory: v(w) = w.5 when w > 0 = -2(-w) .5 when w < 0 a. Is this individual loss-averse? Explain. b. Assume that this individual weights values by probabilities, instead of using a prospect theory weighting function. Which of the following prospects would be preferred?
