Unformatted text preview: prize (chose (2)), while in the second case most people preferred the sure prize (chose (3)). Such a preference does not conﬂict with expected utility theory if we interpret a prize to reﬂect a “monetary change.” However, if we assume that the decision maker takes the ﬁnal wealth levels to be his prizes, we have a problem: in terms of ﬁnal wealth levels, both choices can be presented as being between a sure prize of $1500 and a lottery that yields $2000 or $1000 with probability 1 / 2 each....
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This note was uploaded on 12/29/2011 for the course ECO 443 taught by Professor Aswa during the Fall '10 term at SUNY Stony Brook.
- Fall '10