People are willing to pay less for a risky prospect than for its worst possible outcome

Reminder of how averse we are to risks:

Gneezy et al. (2006) documented that people were willing to pay less for a risky prospect than for its worst possible outcome. For instance, people were willing to pay an average of $26.10 for a $50 Barnes and Noble gift card but only $16.12 for a gamble where participants were guaranteed to win either a $50 or $100 gift card, each with a 50% probability. This general finding has been replicated by many independent research teams (e.g., Andreoni & Sprenger, 2011; Newman & Mochon, 2012; Simonsohn, 2009; Wang, Feng, & Keller, 2013; Yang, Vosgerau, & Loewenstein, 2013). *

In a previous summary: When Risk Is Weird: Unexplained Transaction Features Lower Valuations. Robert Mislavsky and Uri Simonsohn. Management Science, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2983852