Problem 3 Read the following excerpt from Thaler and Johnson (1990): \"Imagine that you are attending a convention in Las Vegas, and you walk into a casino. While passing the slot machines, you put a quarter into one machine and, surprisingly, you win $100. Now what? Will you gambling behavior for the rest of the evening be altered? Might you make a few more serious wagers, even if you usually abstain? Suppose instead that you had $100 in cash stolen from you wallet while taking a swim at the pool. How will that alter your behavior?\" We will use a model with reference dependence utility to study these situations. Lydia is playing blackjack for real money. She has reference-dependent preferences over money: if her earnings are m and her reference point is 'r, then her utility for money is 110% r), where the value function, '0, satises x) 2 ln(:r. + 1) for :1: Z 0, and 0(13) 2 21(LE + 1) for a: