Question: Another person with the same value function is facing the choice between a sure $2 and a 5050 gamble that pays $5 if he wins

Another person with the same value function is facing the choice between a sure $2 and a 50–50 gamble that pays $5 if he wins and $1 if he loses.

(a) If he takes the worst possible outcome as his reference point, what is the value of the sure amount and the gamble? Which would he prefer?

(b) If he takes the best possible outcome as his reference point, what is the value of the sure amount and the gamble? Which would he prefer?

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