Consider the following scenario to answer the questions that follow.
Suppose that, in an experimental setting, 100 students are presented with two situations involving risk and return. The students are first asked to choose between Gamble A and Gamble B, where:
Gamble A: The student will receive $1 million with a 100% probability.
Gamble B: The student will receive $1 million with an 89% probability, $5 million with a 10% probability, and $0 million (nothing) with a 1% probability.
The students are then asked to choose between Gamble C and Gamble D, where:
Gamble C: The student will receive $5 million with a 10% probability.
Gamble D: The student will receive $1 million with an 11% probability.
-If Student 1 chose Gambles A and C,Student 2 chose Gambles A and D,and Student 3 chose Gambles B and C,which choices exhibited preference reversal?
A) All students exhibited preference reversal.
B) Student 1 and Student 2 exhibited preference reversal, but Student 3 did not.
C) Student 1 and Student 3 exhibited preference reversal, but Student 2 did not.
D) Student 1 exhibited preference reversal, but Student 2 and Student 3 did not.
E) None of the students exhibited preference reversal.
Correct Answer:
Verified
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