Instructions

Please choose between: A: A chance of winning 4000 Euro with probability 0.2 (expected value 800 Euro)
B: A chance of winning 3000 Euro with probability 0.25 (expected value 750 Euro)

C: A chance of winning 4000 Euro with probability 0.8 (expected value 3200 Euro)
D: A chance of winning 3000 Euro with certainty.

Evaluations Number of players: 25
Frequency of different decisions:
Comments In large scale experiments, most players (about 70%) choose 4000 Euro with probability 0.2 (A) rather than 3000 Euro with probability 0.25 (B). And indeed, the expected value 4000 Euro with probability 0.2 (800 Euro) is larger than of 3000 Euro with probability 0.25 (750 Euro). In the second decision, most choose 3000 Euro with certainty (D). This is paradox. First of all, the expected value of C, 4000 Euro with probability 0.8 (3200 Euro), is larger than that of D, 3000 Euro with certainty (3000 Euro). More puzzling still, the values in the first decision are obtained from those in the second decision simply by reducing the odds by the factor 4. It is as if we first tossed two coins and do the second decision only if both show heads.