2. In betting, the odds of a bet is the reward you get if the bet...

 

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2. In betting, the odds of a bet is the reward you get if the bet is successful. The odds are offered by bookmakers with whom you can bet. The least likely an event, the higher the odds. Example: the odds of Australia winning the second match of the Bledisloe Cup against New- Zealand in rugby union on the 21st of August are around 10. It means that bookmakers think it is unlikely Australia will win. A gambler betting on Australia $1, would get $10 if Australia wins. In comparison, the odds for New Zealand are 1.04. It means that a gambler betting $1 on New Zealand, would only get $1.04 if New Zealand wins. It is often observed that gamblers tend to prefer bets with large odds, and that they are less interested in bets with low odds. Using what you know about prospect theory, please give a possible reason for this phenomenon. Please elaborate, and use the precise terms seen in the lecture. Assume you do not have any aversion for gambling. 2. In betting, the odds of a bet is the reward you get if the bet is successful. The odds are offered by bookmakers with whom you can bet. The least likely an event, the higher the odds. Example: the odds of Australia winning the second match of the Bledisloe Cup against New- Zealand in rugby union on the 21st of August are around 10. It means that bookmakers think it is unlikely Australia will win. A gambler betting on Australia $1, would get $10 if Australia wins. In comparison, the odds for New Zealand are 1.04. It means that a gambler betting $1 on New Zealand, would only get $1.04 if New Zealand wins. It is often observed that gamblers tend to prefer bets with large odds, and that they are less interested in bets with low odds. Using what you know about prospect theory, please give a possible reason for this phenomenon. Please elaborate, and use the precise terms seen in the lecture. Assume you do not have any aversion for gambling.