In Example 2, suppose $\lambda=1$. Which of the following statements would be true?
A) The utility function is concave in losses.
B) The utility function is convex in gains.
C) The utility function does not display loss aversion.
D) The value function over losses is linear.

Question

Quizplus · Accepted Answer

When $\lambda = 1$, the utility function treats gains and losses symmetrically, indicating no loss aversion. Loss aversion typically requires $\lambda > 1$, where losses are weighted more heavily than gains.

In Example 2, Suppose λ=1\lambda=1λ=1 Which of the Following Statements Would Be True? A)

In Example 2, Suppose $\lambda=1$ Which of the Following Statements Would Be True?
A)