In this part of the study, we also ask you to think about 50-50 gambles to WIN or LOSE money; however in this part, we want you to put a BUYING PRICE on each gamble.
For gambles you want to play, think of the highest price you would be willing to pay for the opportunity to play the gamble for real and win one of the prizes of the gamble. That is, you will pay an amount of maney and you get to receive the prize of the gamble, depending on the toss of a coin.
For example, what is the most you would pay for a 50-50 chance to WIN $100 or WIN $20? The worst you can do is to receive $20, so you should be willing to pay at least $20, but you would probably be willing to pay more because you have a 50% chance to get $100. You will type in your judgment of the HIGHEST price you are willing to pay to buy an opportunity to play the gamble. DON'T TYPE the "$" SIGN in the box. Just type the number in the box. 1. WIN $100 OR WIN $90 Buying Price =
For gambles you DO NOT WANT to play, think of the highest price you would pay to AVOID having to play the gamble. This is like BUYING INSURANCE. You pay a certain amount and you do NOT need to play the gamble. When you buy insurance, if something bad happens, the insurance company has to pay the losses. If you are worried that someone might steal your car you buy insurance so that you do not have to pay the cost to replace it.
For example, what is the most you would pay to AVOID having to play a 50-50 gamble to either LOSE $20 or LOSE $100. You should be willing to pay at least $30 because that is least you might lose, and you would be willing to pay more than that, because it is possible that you might LOSE $100. Suppose there is a person who is willing to pay $60 to avoid this gamble; that person would type -60 in the box next to the problem, as shown below. How much would you be willing to pay to avoide it? Repplace what is in the box in this example, and type the amount you would pay to AVOID this gamble, with a minus sign. DON'T TYPE a "$" Dollar Sign. 2. LOSE $100 OR LOSE $90 Buying Price =
Notice that you type a MINUS sign before the number, because in this case you DO NOT WANT to play the gamble, but you are paying to take the gamble away. It is VERY IMPORTANT that you put in a minus sign for gambles you do not want to play, so we can learn which gambles you do or do not want to play. It is also important you assign a dollar value to each gamble, so we know how much you do or do not want to play it.
In both cases you are buying CONTROL over the gamble. You are buying the right to play it or to avoid it. When you want to play the gamble, just type in the highest amount you would pay to play it. When you DO NOT want to play the gamble, type in a MINUS sign and the highest amount you would pay to AVOID the gamble. 3. LOSE $20 OR WIN $100 Buying Price =
We are trying to learn how people evaluate gambles. We want you to put a value on each of these gambles by telling us a number to inform us how good or bad each gamble seems to you. Use negative numbers for the ones you don't want to play by using the MINUS sign before the number. Use negative numbers for gambles you do not want to play, use 0 if you don't care one way or the other, and positive values for gambles you want to play. 4. WIN $100 OR LOSE $90 Buying Price =
REMEMBERS: Do NOT TYPE the $ dollar sign. DO use the MINUS sign for gambles you DO NOT WANT TO PLAY, and enter the amount you would pay to AVOID playing those gambles.
Female Male
Please check your answers. When you are done, push the button below.