Suppose there is a covered bowl with 3 red balls and 6 other balls, which could be black or yellow. The Decision Maker [DM] doesn’t know how many black or yellow balls there are, other than there are 6 in total. The DM will choose one ball from the bowl; each ball is equally likely to be chosen. The DM is offered a choice between Option A, which pays off LKR1000 if a red ball is drawn (0 otherwise) or Option B, which pays off LKR1000 if a black ball is drawn (0 otherwise). The DM says she prefers A to B. The DM is then offered a choice between Option C, which pays off LKR1000 if a red or yellow ball is drawn (0 otherwise), or option D, which pays off LKR1000 if a black or yellow ball is drawn (0 otherwise). The DM says she prefers D to C. Argue that these preferences are not consistent with the things you learned about decision making under uncertainty and the basics of the theory of expected utility.

Suppose there is a covered bowl with 3 red balls and 6 other balls, which could be black or yellow.
The Decision Maker [DM] doesn’t know how many black or yellow balls there are, other than there
are 6 in total. The DM will choose one ball from the bowl; each ball is equally likely to be chosen.
The DM is offered a choice between Option A, which pays off LKR1000 if a red ball is drawn (0
otherwise) or Option B, which pays off LKR1000 if a black ball is drawn (0 otherwise). The DM
says she prefers A to B. The DM is then offered a choice between Option C, which pays off
LKR1000 if a red or yellow ball is drawn (0 otherwise), or option D, which pays off LKR1000 if a
black or yellow ball is drawn (0 otherwise). The DM says she prefers D to C.
Argue that these preferences are not consistent with the things you learned about decision making
under uncertainty and the basics of the theory of expected utility.