Q4 (10 marks). A decision maker follows prospect theory and faces the lottery L = (15, 1/2; 21, 1/3; 27, 1/6). The utility function for outcomes of the decision maker is piecewise linear and given by v(x) = x if x >= 0 (domain of gains), -2.5(-x) if x < 0 (domain of losses). The probability weighting function is w(p) = e^(-(-ln p)^0.5) (i.e., beta = 1 and alpha = 0.5). The reference point of the decision maker is r = 22. What is the certainty equivalent of the lottery L = (15, 1/2; 21, 1/3; 27, 1/6) to this decision maker? (A) -6.78 (B) -5.16