Question

Use the value function in question 3 to explain the results from the

following lottery choice experiment. Carefully draw a labelled value

function diagram in your answer.

Decision

Option A

Option B

1:

1.00 for £50

0.00 for £0

0.5 for £100

0.5 for £0

2:

1.00 for -£50

0.00 for £0

0.5 for -£100

0.5 for £0

-

Eighty - five per cent of the participants chose option ‘A’ in decision 1.

-

Ninety-five per cent of the participants chose option ‘B’ in decision 2.

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