This is why you should use expected utility calculations. The utility of $20,000 also contains the utility of saving your family’s lives (say $1,650,000) and retaining a house ($300,000), so choosing between 100% chance of $1,975,000 or 50% chance of $2,025,000 is much easier.
This is why you should use expected utility calculations. The utility of $20,000 also contains the utility of saving your family’s lives (say $1,650,000) and retaining a house ($300,000), so choosing between 100% chance of $1,975,000 or 50% chance of $2,025,000 is much easier.