Intermediate microeconomics
Tversky and Kahneman (1992) proposed the following probability
weighting function.
๐ค(๐) =๐๐ฟ
(๐๐ฟ + (1 โ ๐)๐ฟ)
1
๐ฟ
Plot at least 6 evenly spread points and draw the weighting functions from
P = 0 to P =1 for (a) ๏ค = 1 and (b) ๏ค = 0.7. Briefly explain the implications
of these two weighting functions for the way people convert objective
probability information into a subjective sense of probability/likelihood
when assessing gambles.
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use their statistical knowledge to research and compile a report
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