They are using a basic decision making process that works great in real life (uncertain probabilities) but not great in experiments like these (known certain probabilities). This decision making processes works so well in real life that it's probably become second nature for most people and they do it without thinking. People are not inconsistent!
Step 1 - Remove potential choices that could turn out bad. (choices with a significantly lower worst case scenarios than other choices)
Step 2 - Of the remaining choices, pick the choice that has the best best case scenario.
1A:
WorstCaseSenario = 1 million
BestCaseSenario = 1 million
1B:
WorstCaseSenario = I get nothing
BestCaseSenario = 5 million
2A:
WorstCaseSenario = I get nothing
BestCaseSenario = 1 million
2B:
WorstCaseSenario = 1 get nothing
BestCaseSenario = 5 million
This alone explains the decisions but there is an added effect that enhances it. 1$ DOES NOT equal 1 standard unit of happiness. The quality of life enhancement from having 1 million to having 2 million is not the same difference as the quality of life enhancement from no money to 1 million. I expect most people intuitively know this but here's an article siting a study that supports this.
SOLVED!
They are using a basic decision making process that works great in real life (uncertain probabilities) but not great in experiments like these (known certain probabilities). This decision making processes works so well in real life that it's probably become second nature for most people and they do it without thinking. People are not inconsistent!
Step 1 - Remove potential choices that could turn out bad. (choices with a significantly lower worst case scenarios than other choices)
Step 2 - Of the remaining choices, pick the choice that has the best best case scenario.
1A: WorstCaseSenario = 1 million BestCaseSenario = 1 million
1B: WorstCaseSenario = I get nothing BestCaseSenario = 5 million
2A: WorstCaseSenario = I get nothing BestCaseSenario = 1 million
2B: WorstCaseSenario = 1 get nothing BestCaseSenario = 5 million
This alone explains the decisions but there is an added effect that enhances it. 1$ DOES NOT equal 1 standard unit of happiness. The quality of life enhancement from having 1 million to having 2 million is not the same difference as the quality of life enhancement from no money to 1 million. I expect most people intuitively know this but here's an article siting a study that supports this.
http://www.time.com/time/magazine/article/0,9171,2019628,00.html