Question: Q3. The two most common frameworks that economists use for modelling the way people think about risks are expected utility theory and prospect theory. What

Q3. The two most common frameworks that economists use for modelling the way people think about risks are expected utility theory and prospect theory. What is the need for two (somewhat incompatible) theories to explain the same thing? For example, are there some contexts where one theory makes more accurate predictions? Support your explanation with examples where appropriate. [10 marks]

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The personal characteristics of the sender

The quality of the argumentation

The status rule: We tend to have more confidence in information presented by someone who has a relatively high status and rank in society than by someone who hasnt.