The Truth About Better Decision-Making (Collection), 2/e

Truth 29. The framing principle

Which would you rather have?

A. $10,000 for sure

or

B. A 50–50 chance of winning $20,000 or nothing

This tantalizing proposition is an approach–approach conflict because both options are pretty attractive. (We’d like both of them!) However, we have a little bit of an internal conflict in choosing because as much as we would like to get $20,000, there is a 50 percent chance that we would walk away with nothing. When most people are given the A or B choice, the large majority choose A. (About 85 percent of the students in my MBA and executive courses would rather have $10,000 for sure than a 50–50 chance of winning twice as much money.)

This phenomenon illustrates a basic tenet of human behavior called risk aversion. ...