Gambler 1 has won $100 and Gambler 2 has lost $100. They are both offered a double-or-nothing coin flip. In other words, rather than winning $100, Gambler 1 will end up winning either $200 or $0, and rather than losing $100, Gambler 2 will end up losing either $200 or $0. Research suggests that which of the following outcomes is most likely?

Question

Quizplus · Accepted Answer

This scenario is an example of loss aversion, which is a common phenomenon in behavioral economics. Gambler 2 is more likely to take the bet because they have already experienced a loss, and the potential loss of another $100 feels less significant than it would if they were starting from $0. Gambler 1, on the other hand, has already won money, and the potential loss of $100 feels more significant. Therefore, Gambler 1 is more likely to decline the bet. Thus, the most likely outcome is that Gambler 1 will not take the bet and Gambler 2 will.

Gambler 1 Has Won $100 and Gambler 2 Has Lost