Suppose you have won $1,000 on a game show. In addition to these winnings, you are now asked to choose between:
Alternative 1. Gamble A: Win $1000 with 0.50 probability or Gamble B: Win $500 for sure.
On the other hand, suppose you have won $2,000 on a game show and are then asked to choose between:
Alternative 2. Gamble C: Lose $1,000 with 0.50 probability or Gamble D: Lose $500 for sure.
It is frequently observed that a majority choose Gamble B for Choice 1 while they choose Gamble C in Alternative 2.
Show that the final wealth levels are not different for the two alternatives. If the final wealth levels are not different then why do people choose Gamble B over Gamble A in Alternative 1, while they choose Gamble C over D for Alternative 2?

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The Answer of Suppose you have won $1,000 on a game show. In addition to these winnings, you are now asked to choose between:
Alternative 1. Gamble A: Win $1000 with 0.50 probability or Gamble B: Win $500 for sure.
On the other hand, suppose you have won $2,000 on a game show and are then asked to choose between:
Alternative 2. Gamble C: Lose $1,000 with 0.50 probability or Gamble D: Lose $500 for sure.
It is frequently observed that a majority choose Gamble B for Choice 1 while they choose Gamble C in Alternative 2.
Show that the final wealth levels are not different for the two alternatives. If the final wealth levels are not different then why do people choose Gamble B over Gamble A in Alternative 1, while they choose Gamble C over D for Alternative 2?

Suppose You Have Won $1,000 on a Game Show