Study Prob lems
2. This is evidence that Danny is a risk taker.
Despite the fact that the house advantage is
come of the event is random for all practical
purposes.
4. If you were subject to the gambler’s fallacy, you
would expect the answers to be negatively corre-
lated and would answer “false” to the sixth ques-
tion. If you were subject to the hot hand fallacy,
you would expect the answers to be positively
correlated (i.e., “streaky”) and would answer
“true” to the sixth question.
an individual’s specific self- interest to do so. In
contrast, the pursuit of fairness could explain
why people behave in this way.
8. Prospect theory suggests that people are willing
to take on more risk when trying to avoid a loss
(or when people feel like they’ve already experi-
enced a loss). Therefore, it’s not surprising that
people would be more willing to gamble when
the alternative is a sure loss than when the alter-
Questions for Review
1. Bounded rationality is the concept that people
either can’t or won’t do the information gather–
tively correlated (i.e., that outcomes will reverse
or revert back to the mean). An example of the
hot hand fallacy is people expecting to keep win-
ning at the blackjack table because they’ve expe-
rienced some good outcomes and think that it’s
“their day.” An example of the gambler’s fallacy is
a baseball fan expecting his favorite player to hit
a home run, even though the player has been bat–
ting poorly, because the player is “due” for a
home run.
4. Economic theory predicts that the second player
in the ultimatum game would accept any positive
offer, as a positive amount of money is better
than nothing. Furthermore, economic theory
predicts that because the first player knows that
the second player will accept any positive offer,
the first player will make the smallest pos si ble
offer to the second player.
5. Prospect theory postulates that people think
Solutions to Chapterfi17 Text Prob lems
psychic payoff of taking revenge on Player 1.
Knowing the size of the pot and resenting Player
predicts that Player 2, faced with a choice
between $2 and nothing, will accept the offer