We discussed Prospect Theory in class. This assignment relates to Prospect Theory. You can do this individually or in groups.

Scenario: You are a marketing manager for a new fitness app with two subscription options:

Option A: Pay $$10$ per month and have a chance to win a free year of membership through a monthly raffle $(1\%$ chance$).$

Option B: Pay a flat $$8$ per month with no chance of winning anything.

Instructions:

$1.$ Explain: Briefly explain Prospect Theory and its key concepts relevant to this scenario. What is the role of certainty?

$2.$ Predict: Based on your analysis, which option do you think will be more appealing to most customers and why? Justify your prediction with specific concepts from Prospect Theory. NOTE: There is no right answer on this one, you can argue that Option A is preferred and be right, you can argue that Option B is preferred and be right. Im looking to see if you can relate the choices consumers make to Prospect Theory.

$3.$ Design: Imagine you are tasked with redesigning the offer to attract more customers. Propose one alternative pricing strategies based on Prospect Theory principles. Explain how each strategy leverages these principles to influence customer choices.