Regina and Brenda are considering playing a game called Matching Twenties. In th
ID: 1128566 • Letter: R
Question
Regina and Brenda are considering playing a game called Matching Twenties. In this game, Regina and Brenda will each place a $20 bill on the table. Both players will then toss a fair coin. If both Regina and Brenda toss heads or both Regina and Brenda toss tails, Regina wins the $40 on the table. If one woman tosses heads and the other tosses tails, Brenda wins the $40 on the table.
Regina decides that she is not willing to play this game because a loss of $20 to Brenda would cause her to lose more utility than she would gain if she won $20 from Brenda. Which concept best explains Regina’s choice not to play the game?
A. hedonic editing
B. gain aversion
C. prospect theory
D. signaling
E. gain-loss asymmetry
Explanation / Answer
C.Prospect Theory
Gains and losses are valued differently. when the individual takes a decision keeping in mind the potential gains rather than the losses it is called prospect theory.
In this case, Regina opted to go out of the game because a loss of $40 would make her loose more than what she will gain. here she was worried about her gains and not her loss.