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Prospect Theory and Behavioral Economics Quiz

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Prospect Theory and Behavioral Economics Quiz

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Questions and Answers

According to Prospect Theory, decision-making under risk involves a two-step choice process. What are the two steps?

Simplification and segregation

Coding and combination

Editing and evaluation (correct)

Detection and cancellation

Prospect Theory's editing phase involves the preliminary analysis of offered prospects. What is the purpose of this phase?

To simplify options

To code prospects

To detect dominance

To facilitate evaluation (correct)

Prospect Theory's evaluation phase involves individuals evaluating each edited prospect. How do individuals choose the prospect with the highest value?

By simplifying options

By choosing the prospect with the highest value (correct)

By detecting dominance

By segregating prospects

What are some examples of violations of Expected Utility Theory (EUT)?

<p>Allais paradox and Ellsberg paradox</p> Signup and view all the answers

Prospect Theory involves the use of heuristic rules. Are these rules necessarily conscious?

<p>No, they are not necessarily conscious</p> Signup and view all the answers

Prospect Theory and Behavioral Economics Quiz

Choose a study mode

Podcast

Questions and Answers

According to Prospect Theory, decision-making under risk involves a two-step choice process. What are the two steps?

Prospect Theory's editing phase involves the preliminary analysis of offered prospects. What is the purpose of this phase?

Prospect Theory's evaluation phase involves individuals evaluating each edited prospect. How do individuals choose the prospect with the highest value?

What are some examples of violations of Expected Utility Theory (EUT)?

Prospect Theory involves the use of heuristic rules. Are these rules necessarily conscious?

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