Reference no: EM131083634
Framing effects and prospect theory: Life and Death •
The Asian Disease Problem: Imagine that the United States is preparing for an outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Scientific estimates of the programs are as follows: – A: If program A is adopted, 200 people will be saved – B: If program B is adopted, there is a 1 in 3 chance that 600 people will be saved and a 2 in 3 chance that no people will be saved – Result: 72% choose A •
Now consider a choice between C and D: – C: If program C is adopted, 400 people will die – D: If program D is adopted, there is a 1 in 3 chance that nobody will die and a 2 in 3 chance that 600 will die – Result: 78% choose D
What is the expected value of the number of deaths?
A: 600 +(-200) = 400 deaths
B: 600 +0.333*(-600) = 400 deaths
C: 400 + 0 = 400 deaths
D: 0.333*0 + 0.667*600 = 400 deaths
For this assignment, you are asked to create TWO of your own sets of dual problems illustrating the framing effect discussed in class, for a total of four “choose A or B” problems. Be creative. Your problems may involve decisions about money, life and death situations, or anything else for which the outcome is quantifiable (the Asian Disease problem discussed in class is an example of one set of dual problems; you must create two sets of problems like this one for this assignment). For each of your framing problem pairs, you must do two analyses:
1) Demonstrate mathematically the equivalence of the paired prospects using probability theory. In other words, the expected value of all 4 alternatives for each problem pair should be the same. Use the lecture notes as a model for how to do this. If the pairs are not mathematically equivalent, you will be asked to revise and resubmit them for partial credit.
2) Demonstrate mathematically, using the prospect theory equations presented in class, what the predicted human choices are. Use the lecture notes as a model for how to do this.
|
Financial partners company
: 1) The Financial Partners company is considering selecting Project X. The company expects the project will produce a one-time benefit of $850,000 two years from now. The interest rate at a local bank is 9% per year. How much would need to be inves..
|
|
Markup pricing-target-return pricing-perceived-value pricing
: Think about the pricing methods--markup pricing, target-return pricing, perceived-value pricing, value pricing, going-rate pricing, and auction-type pricing. As a consumer, which do you prefer to deal with? Why? If the average price were to stay the ..
|
|
Calculate the formation constant kt for the process
: A solution in which the analytical concentrations of Cu2+ amd A2- are 2.15 ×10-4 M and 4.00×10-4 M, respectively, has an absorbance of .654 when measured under the same conditions. Use this information to calculate the formation constant kt for th..
|
|
What is the slope of the budget line
: María lives in the beautiful country of Inflationlandia. She earns 30 million pesos a month. She only consumes hamburgers and buns. The price of a dozen hamburgers is 2 million pesos and the price of a dozen buns is 1 million pesos. Graph her budget ..
|
|
Framing effects and prospect theory-life and death
: The Asian Disease Problem: Imagine that the United States is preparing for an outbreak of an unusual Asian disease that is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Demonstrate mathematically the ..
|
|
How trainers make the training site and instruction
: How would you conduct a needs assessment to determine if new lenders are starting their jobs without the necessary knowledge and skills to perform well, and if the organization of the training curriculum
|
|
Discuss your basic understanding of this emerging issue
: Discuss your basic understanding of this emerging issue and of the research findings. Criticize aspects of this emerging issue and present your assigned side of the debate in a rational manner.
|
|
Type of economic or other conditions in mexico
: Given the factors that affect the value of a foreign currency, describe the type of economic or other conditions in Mexico that could cause the Mexican peso to weaken and thereby adversely affect your business.
|
|
Why is the corporation type of legal organization
: As distinguished from sole proprietorships and partnerships, why is the corporation type of legal organization so valuable to a firm? Is the corporation type of legal form a right or is it a privilege?
|