Sure Thing

How much would you be willing to bet if you had an 8% chance of winning $100?

How much would you be willing to bet if you had an 80% chance of winning $10?

According to behavioral economics, since the expected payoff for both is $8 (.08 x $100 or .8 x $10), but the first option offers a higher potential payoff, most people would value the first option more. That is, they’d be willing to bet more.

But what’s interesting is that most people, if they had to choose between the two, would choose the second option because of certainty bias. An 80% chance of something sounds better than 8%, even if the reward might be ten times more.

Basically, just because we value something higher, doesn’t mean we choose it more often. We still want to go for the sure thing.

This does not accurately account for external conditions, however, such as the wearing of a sequin minidress, the feeling after a Cher concert, the effects of five martinis, or your girlfriends shouting at you, “Just go for it you crazy bitch!”