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That's because Kahneman gets the signs wrong in the OP. Question 5a is: $900 @ 100%, or $1000 @ 90% Most people choose $900 @ 100% Question 5b is: -$1000
by anothermachine 15y ago
That's because Kahneman gets the signs wrong in the OP.
Question 5a is: $900 @ 100%, or $1000 @ 90%
Most people choose $900 @ 100%
Question 5b is: -$1000 + $100 @ 100%, or -$1000 + $1000 @ 10%
Most people choose -$1000 + $1000 @ 10%
Written this way, the false symmetry vanishes, and we see that in both cases, people are risk averse when the payoff is low, and risk-seeking when the payoff is high. Which is to say, people value life-changing sums super-linearly as compared to insignificant sums.
- roel_v 15y agoBut that's not what the research was about, if I'm understanding it correctly (the research has been mentioned a lot in popular economics literature, so I think that I am understanding it correctly, at least at the high level). The conclusion of the research is that people are more risk-averse when it comes to losses - i.e. they'd rather not win 100$ than loose 100$. If I'm understanding you correctly, you're saying it's about the amounts; and I think I'd have to agree with you that for the examples to be equivalent, the amounts in 5b should be multiplied by 10. But then again, maybe that would introduce another comprehension hurdle or cognitive correction effect which would render the experiment invalid. Interesting question to ask the original researchers, although I presume that by now (after decades) they've addressed it somewhere already :)