Tyler has loss averse preferences. In particular, Tyler values a gain of amount x as u(x) = x and values a
loss of ?x as u(?x) = ?2x

(a) What is the maximum amount of money that Tyler would pay for a lottery that pays $1000 with
probability 1
2 and $0 with probability 1
2 ?

(b) What is the maximum amount of money that Tyler would pay to avoid playing a lottery that loses
$1000 with probability 1
2 and loses $0 with probability 1
2 ?

(c) Propose a utility function exhibiting diminishing sensitivity and calculate the answers to part (a) and
part (b) using this utility function.
I get a and b, but the diminishing sensitivity utility function i don't understand, help me anon's