Valuefunction:

v(x) = x^0,5for x>0

-(-x)^0,5 for x<0 = 2

Decision weight function

(p) = p

Problem 1:

Assume yourself richer by $300 than you are today. You are offered a choice between:

1. A sure gain of $100, or
2. A 50% chance to gain $200 and a 50% chance to lose $0.

What do you choose? Please show calculations

Problem 2:

Assume yourself richer by $300 than you are today. You are offered a choice between:

1. A sure loss of $100, or
2. A 50% chance to lose $200 and a 50% chance to lose $0.

What do you choose? Please show calculations