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Prospect Theory created 2011.01.24

# Prospect Theory created 2011.01.24 - Change in Quiz...

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4/15/11 Announcements Change in Quiz structure No questions from required readings (you are still required to read assigned readings) Questions will be from what we have covered in class Generally the topics we covered one week before the quiz You will have more time to prepare I will let you know the included topics for each quiz beforehand Quiz #2, February 27th

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Click to edit Master subtitle style 4/15/11 Prospect Theory Kahneman and Tversky (1979, Econometrica)
4/15/11 Roadmap Expected Utility theory Axioms Critique Prospect Theory Value function Probability weighting function Editing phase Applications

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4/15/11 Certainty Effect Problem 2 C D \$2500 .33 \$2400 .34 \$0 .67 \$0 .66 Problem 1 A B \$2500 .33 \$2400 1 \$2400 .66 \$0 .01 18% 82% 83% 17% Problem 3 A B \$4000 .80 \$3000 1 \$0 .20 20% 80% Problem 4 A B \$4000 .20 \$3000 .25 \$0 .80 \$0 .75 65% 35%
4/15/11 The Reflection Effect Problem 1 Positive Prospect Negative Prospect P3 (\$4000, 0.8) (\$3000, 1) P3’ (-\$4000, 0.8) (-\$3000, 1) P4 (\$4000, 0.2) (\$3000, 0.25) P4’ (-\$4000, 0.2) (-\$3000, . 25) P7 (\$3000, 0.9) (\$6000, 0.45) P7’ (-\$3000, 0.9) (-\$6000, 0.45) P8 (\$3000, 0.02) (\$6000, 0.01) P8’ (-\$3000, 0.02) (-\$6000, 0.01)

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4/15/11 Probabilistic Insurance

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