Question: g in $4, hence their expected $ profit is . If the coffeeshop orders 2 croissants, then they spend $2 to buy them, and then

g in $4, hence their expected $ profit is . If the coffeeshop orders 2 croissants, then they spend $2 to buy them, and then with probability 0.02 they sell nothing, with probability 0.02 they sell 1, and with probability 0.96 they sell both, hence their expected $ profit is .

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2. Find out if there are other reference points that can be used as reasonable alternatives.

1. Identify your reference point when making a decision based on an element of risk.

3. If there are reasonable alternatives, think about your decisions based on the different reference points and see if there are any contradictions in the decisions.