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?

A) Both will take the bet.
B) Neither will take the bet.
C) Gambler 1 will not take the bet and Gambler 2 will.
D) Gambler 1 will take the bet and Gambler 2 will not.

Question

Ethan Espiritu · Accepted Answer

Final Answer : C, Explanation :  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.

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