certainty effect

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The tendency of human judges to overweight outcomes that are certain relative to outcomes that are merely probable. Thus, if given a choice between $1,000 and gamble in which a fair coin is tossed and the prize is $2,010 if the coin falls heads and nothing if it falls tails, most people prefer the certainty of $1,000, although the expected value of the gamble is $1,005. This phenomenon arises from risk aversion.

Subjects: Psychology.

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