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Subjective Probability in Prospect Theory
- Sketch the Subjective Probability Curve in Prospect Theory (3 points)
- What are the two main features of this curve and how do they relate to behavior? (2 points)
- What are the two main reference point in the Subjective Probability Curve for Prospect Theory? (2 point)
- How can this reference point help us to understand the shape of the subjective probability curve? (2 points)
- What property of the Subjective Probability Curve might explain why people play the lottery? (1 point)