"(a) Assume you have been exposed to a disease which if contracted leads to a quick and painless death within a week. The probability you have the disease is 0.001. What is the maximum you would be willing to pay for a cure?Notice that in both (a) and (b), you are asked to put a monetary value on facing a 0.001 probability of death. However, for people who took this survey in 1980, a common answer to question (a) was $200, while a common answer to question (b) was $10,000. But the scenarios are framed differently, and Thaler often finds himself digging into "framing effects." He refers to this an example of an "endowment effect," which is that that when you already have something, you tend to set a price differently than if you don't have something. If you are selling your own house, you ask for a higher price than you would offer if buying an essentially similar house.
(b) Suppose volunteers would be needed for research on the above disease. All that would be required is that you expose yourself to a 0.001 chance of contracting the disease. What is the minimum you would require to volunteer for this program? (You would not be allowed to purchase the cure.)"
"Large-scale experiments conducted by Richard Thaler and other behavioural economists, have shown that notions about fairness play a major role in decision-making. People are prepared to refrain from material benefits to maintain what they perceive as just distributions. They are also prepared to bear a personal cost for punishing others who violate basic fairness rules, not only when they themselves are affected but also when they see someone else affected by injustice."