I would further predict that if someone is wealthy enough, or if the winning amount is small, e.g. $24 and $27, they are much more likely to choose 1B over 1A—because of how much less emotionally devastating it would be to lose, or rather, how much less devastating the participant imagines losing to be.
I decided to Google for literature on this and found this analysis. It takes some effort to decode, but if I understand Table 1 correctly, (1) experiments testing the Allais Paradox have results that often seem inconsistent with each other, and strange at first glance (roughly speaking, more people choose 1B & 2A than you’d think), which reflects a bunch of underlying complexity described in section 3; (2) to the extent there is a pattern, I was right about the smaller bets; and (3) the decision to maximize expected financial gain (1B & 2B ≃ RR in Table 1) is the most popular choice in 43% of experiments.
I think these kinds of ‘side channel’ loss information are what make your intuition value 1A > 1B. In a way the implicit assumptions in the offer are what cause the trouble. Naive subjects are naive only to pure math not to real life.
This was my thought exactly. If I was given the option to keep the rest private if I lost, 1A would be a distinctly preferable choice. If I had a 1⁄34 chance of having to explain how I “lost” $24,000 vs an average loss of $2,200, I might well take choice 1B. (at a later time in my life, when I could afford to lose $2,200, and had significant financial risk from being perceived ask a risk-taker with money).
If I knew the offer wouldn’t be repeated, I might take 1A because I’d really rather not have to explain to people how I lost $24,000 on a gamble.
I would further predict that if someone is wealthy enough, or if the winning amount is small, e.g. $24 and $27, they are much more likely to choose 1B over 1A—because of how much less emotionally devastating it would be to lose, or rather, how much less devastating the participant imagines losing to be.
I decided to Google for literature on this and found this analysis. It takes some effort to decode, but if I understand Table 1 correctly, (1) experiments testing the Allais Paradox have results that often seem inconsistent with each other, and strange at first glance (roughly speaking, more people choose 1B & 2A than you’d think), which reflects a bunch of underlying complexity described in section 3; (2) to the extent there is a pattern, I was right about the smaller bets; and (3) the decision to maximize expected financial gain (1B & 2B ≃ RR in Table 1) is the most popular choice in 43% of experiments.
I think these kinds of ‘side channel’ loss information are what make your intuition value 1A > 1B. In a way the implicit assumptions in the offer are what cause the trouble. Naive subjects are naive only to pure math not to real life.
Yeah, but then you run into the problem of your intuition overwheing the social costs posed by this choice.
This was my thought exactly. If I was given the option to keep the rest private if I lost, 1A would be a distinctly preferable choice. If I had a 1⁄34 chance of having to explain how I “lost” $24,000 vs an average loss of $2,200, I might well take choice 1B. (at a later time in my life, when I could afford to lose $2,200, and had significant financial risk from being perceived ask a risk-taker with money).