Discuss the experimental design

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Question 1: Explain the Allais Paradox illustrating the violation of the Expected Utility Theory. Consider the paper by John Conlisk (1989). Describe the "Three Steps Allais Question" experiment and how the author proposes to solve the Allais Paradox.

Question 2: Kahneman and Tversky (1979) criticize the Expected Utility Theory as a descriptive model of decision making under risk, and they propose the Prospect Theory as an alternative model for describing risk preferences of individual decision makers. Discuss the Certainty Effect and The Reflection Effect. Illustrate the main points of the Value Function, explaining how the reference point is determined and how gains and losses are evaluated under this theory. You should graphically support your explanation of the Value Function.

Question 3: Consider the article by Imas et al. (2016). Discuss the Experimental Design. In particular, you should explain the type of experiment used by the authors, the treatments chosen and the tasks undertaken by the participants. Compare the results between Experiment 1 and Experiment 2 reflecting on the underlying theoretical predictions.

Reference no: EM133144321

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