SCENARIO 1:

Option A:

Option B:

SCENARIO 2:

Option C:

Option D:

Suppose we give you $1,000. You have the following choices:

You can receive another $500 for sure.

You can flip a fair coin. If the coin flip comes up heads, you get another $1,000, but if it comes up tails, you get nothing.

Suppose we give you $2,000. You have the following choices:

You can lose $500 for sure.

You can flip a fair coin. If the coin flip comes up heads, you lose $1,000, but if it comes up tails, you lose nothing.

Consider the following question:

Analyse the option people would choose for each scenario under the context of Loss Aversion. Justify your answers.