Question: Zero expected value Prospect theory is consistent with the result that people frequently reject gambles with an expected value of zero. Suppose you are facing

Zero expected value Prospect theory is consistent with the result that people frequently reject gambles with an expected value of zero. Suppose you are facing a gamble G with a 1/2 probability of winning $10 and a 1/2 probability of losing $10. According to prospect theory, would you prefer the gamble or the status quo? Assume that your value function is v(x)5 !x/2 for gains and v(x)522!0x0 for losses.

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