B-1) Suppose that a consumer follows prospect theory in making decisions with the value function v(...

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B-1) Suppose that a consumer follows prospect theory in making decisions with the value function v( ) and the decision weight function ( ). Assume that v(0) = 0. Consider two lotteries: Lottery 1: 100 dollars for sure Lottery 2: 0 dollars with probability 0.01, 500 dollars with probability 0.10, and 100 dollars with probability 0.89 For each of the following cases, write down an inequality to express that the consumer prefers Lottery 1 to Lottery 2 when these two lotteries are presented. You do NOT need to explain the inequalities. B-1-1) The case in which the reference point does not move. B-1-2) The case in which the reference point increases by 100 dollars when these two lotteries are presented. B-1) Suppose that a consumer follows prospect theory in making decisions with the value function v( ) and the decision weight function ( ). Assume that v(0) = 0. Consider two lotteries: Lottery 1: 100 dollars for sure Lottery 2: 0 dollars with probability 0.01, 500 dollars with probability 0.10, and 100 dollars with probability 0.89 For each of the following cases, write down an inequality to express that the consumer prefers Lottery 1 to Lottery 2 when these two lotteries are presented. You do NOT need to explain the inequalities. B-1-1) The case in which the reference point does not move. B-1-2) The case in which the reference point increases by 100 dollars when these two lotteries are presented.

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