write:But one thing you surely did not do: youdid not compute the possible results of the four combinations of choices (Aand C A and D B and C B and D) to determine which combination

000 and 75% chance to gain nothingDecision (ii): Choose betweenC. sure loss of $750D. 75% chance to lose $1
000 and 25% chance to lose nothingThis pair of choice problems has an important place in the history ofprospect theory
and it has new things to tell us about rationality. As youskimmed the two problems
your initial reaction to the sure things (A andC) was attraction to the first and aversion to the second. The emotionalevaluation of “sure gain” and “sure loss” is an automatic reaction of System1
which certainly occurs before the more effortful (and optional)computation of the expected values of the two gambles (respectively
again of $250 and a loss of $750). Most people’s choices correspond to thepredilections of System 1
and large majorities prefer A to B and D to C.As in many other choices that involve moderate or high probabilities
people tend to be risk averse in the domain of gains and risk seeking inthe domain of losses. In the original experiment that Amos and I carriedout
73% of respondents chose A in decision i and D in decision ii andonly 3% favored the combination of B and C.You were asked to examine both options before making your firstchoice
and you probably did so. But one thing you surely did not do: youdid not compute the possible results of the four combinations of choices (Aand C
A and D
B and C
B and D) to determine which combination youlike best. Your separate preferences for the two problems were intuitivelycompelling and there was no reason to expect that they could lead totrouble. Furthermore
combining the two decision problems is a laboriousexercise that you would need paper and pencil to complete. You did not doit. Now consider the following choice problem: