Changes in the probability of gains or losses do not affect people’s subjective evaluations in linear terms (see also prospect theory and zero price effect) (Tversky & Kahneman, 1981). For example, a move from a 50% to a 60% chance of winning a prize has a smaller emotional impact than a move from a 95% chance to a 100% chance (certainty). Conversely, the move from a 0% chance to a 5% possibility of winning a prize is more attractive than a change from 5% to 10%. People over-weight small probabilities, which also explains the attractiveness of gambling. Research suggests that problem gamblers’ probability perception of losing is not distorted and that their loss aversion is not significantly different from other people. However, they are much more risk-taking and strongly overweight small to medium probabilities of winning (Ring et al., 2018).
References
Ring, P., Probst, C. C., Neyse, L., Wolff, S., Kaernbach, C., van Eimeren, T., Camerer, C. F., & Schmidt, U. (2018). It’s all about gains: Risk preferences in problem gambling. Journal of Experimental Psychology: General, 147(8), 1241-1255.
Tversky, A., & Kahneman, D. (1981). The Framing of Decisions and the Psychology of Choice. Science, 211 (4481), 453-458.