Two urns, identical odds on paper — yet almost everyone picks the same one
Urn A holds 50 red balls and 50 black balls. Urn B holds 100 balls total, red and black in an unknown ratio. Offered a bet on red, most people prefer Urn A. Offered the identical bet on black, most people again prefer Urn A. But if Urn A really gives better odds for both colours, its two colours should add up to more than 100% — so what's going on?
Reveal the answer
People aren't purely judging probability — they're avoiding ambiguity itself, a preference economist Daniel Ellsberg demonstrated in 1961 that standard expected-utility theory can't explain, since it has no room for 'I don't know the odds' as its own source of aversion, distinct from the odds simply being bad. Now called ambiguity aversion, it shows up in real financial and policy decisions whenever odds are unknown rather than merely unfavourable.
— Daniel Ellsberg, Risk, Ambiguity, and the Savage Axioms — Quarterly Journal of Economics, 1961