Question

Consider the following gamble. A standard pack of playing cards, including 26 red cards (diamonds and hearts) and 26 black cards (spades and clubs), is shuffled, and the card on top of the deck is turned face up.A· If the face-up card is red, the gambler wins $11B· If the face-up card is black, the gambler loses $9.

Answer 1

Answer:

Following are the description to this question:

Explanation:

In the give question, some information is missing so, the missing information and its solution can be defined as follows:

Following are the Missing information:

"Expected value theory predicts that most people:"

"Prospect theory predicts that people:"

Solution:    

Accepting the gamble:  

The complete actual cost to this game is (0.5 \times $11) + (0.5 \times -$9) = + $1, as per value function concept. If the majority of the population firstly function completely in a rational way, many other people need to accept the gamble.  

Rejecting the gamble:  

Analysis has also shown that risks of losing are 1.5 to 2 times very negative with most people than that of the odds of even an equal benefit were positive. Thus, its theory for prospective potential predicts that almost all people would quantify and not embrace the net psychological effect of its game.