Suspicious minds
People can be too sceptical, and irrationally turn down offers that are genuine. Or might that not be as irrational as it seems?
Imagine a mad billionaire makes you the following offer: he will pay you an amount of money every time you drink a can of cola, starting at one dollar, increasing by one dollar with every subsequent drink. There is one constraint: as soon as you fail to drink the next can of cola within 24 hours, the payments will stop forever. Would you take the offer? If you even have the slightest hesitation, you are not alone. But why might that be?
I came across this thought experiment on twitter a few days ago. At first sight, it is a no-brainer — apparently you can only win if you accept it: even drinking just the one can will earn you a dollar. My first reaction was to do a search to find out whether this was a recasting of a classic thought experiment, but to be honest, I also wanted to know whether there was a catch that I had missed. The thing is: I wasn’t sure that there wasn’t a catch, even though it seemed to be a pretty safe way of making money, potentially a large amount of it.
This hesitation is not risk aversion: the way the case is presented is that there are two options, both with certain outcomes: either you decline and you gain nothing, or you…
