Tag Archive | economics

An Offer You Cannot Refuse

Currency - by bradipo

Imagine that you are on a game show.  Consider the following two scenarios:

The host has given you $2000 to begin with.  You are now given a choice – you can stay with your money or participate in the “Double or Nothing”.  Should you choose the event, the host would flip a fair coin.  Should the coin land heads, you will get an extra $2000.  Should it land tails, you lose the $2000 you have.

The host has given you $4000 to begin with.  You are now given a choice – you can participate pay a fine of $2000 or participate in the “Trap of Doom” event.  Should you choose the event, the host would flip a fair coin.  Should the coin land heads, you get to keep all $4000.  Should it land tails, you loose all $4000 to the “Trap of Doom”.

Would you participate in the “Double or Nothing” event?  Would you participate in the “Trap of Doom”?  Are your answers different?

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