The Four-Quadrant Pattern of Preferences

In the book, Kahneman summarizes how we evaluate gains and losses using the four-fold pattern of preferences. In the high probability big gains quadrant, people will accept a less than expected value of the gamble to lock in a big gain. On the other extreme, we become risk-seeking and take irrational gambles for desired but improbable outcomes. When we combine the possibility effect, availability cascade and cognitive ease heuristics, we understand why people pay an undue amount of attention to rare events like terrorist attacks or asteroid strikes.