The issue is that the first $1000 gained is worth more than the second $1000. Similarly, the first $1000 lost hurts more than the second $1000. On the gain sid

The issue is that the first $1000 gained is worth more than the second $1000. Similarly, the first $1000 lost hurts more than the second $1000. On the gain side, the different values should be self evident. I think we can all intuitively understand why making $100000 instead of $50000 is bigger deal than $150000 instead of $100000. So let's assign utility to the numbers: first $1000 = 1 second $1000 = .8 third = .6 fourth = .4 Option #1 gives us 2.4 whereas option #2 gives us 2.24. I'd argue that we can similarly rank the losses the same: first $1000 lost = -1 second = -.8 etc. which gives us -2.4 vs --2.24 meaning we should obviously take the option #2. Now the interesting question is why we can assign similar yet negative values for the losses. I'll give two examples that might show why this is true. First, consider living paycheck to paycheck. I only have $500 of buffer. In this case, while losing $2000 instead of $1000 is worse, it's not worse by a lot because either way I can't afford rent and I'm evicted. As a second example, consider bankruptcy. If we take losses to high values, eventually each additional loss doesn't subtract anything from my "happiness". I've already hit the bankruptcy point and nothing worse can happen. These are of course the two extremes, but I think it's easy to complete the spectrum and show that for any $x the first loss of $x hurts more than the second loss of $x.