Anomalies are sometimes explained in terms of nonlinear perceptions of prob-
abilities, which are generally thought to involve overweighting probabilities near 0
and underweighting probabilities near 1. In the choice between a sure $3 and a 0.8
chance of $4, for example, some underweighting of the 0.8 for the second option could
enhance the likelihood of the safe choice. Next consider a person who chooses a 0.05
chance of $100 over a sure $10. Such a person exhibits risk-seeking behavior, but this
could be due to a tendency to overweight the low probability of the high gain, instead
of being caused by con ...
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