Would you rather have $1,000 for sure or a 90 percent chance of $5,000? A guaranteed $1,000 or a 75 percent chance of $4,000?
In economic theory, questions like these have no right or wrong answers. Even if a gamble is mathematically more valuable — a 75 percent chance of $4,000 has an expected value of $3,000, for instance — someone may still prefer a sure thing.
People have different tastes for risk, just as they have different tastes for ice cream or paint colors. The same is true for waiting: Would you rather have $400 now or $100 every year for 10 years? How about $3,400 this month or $3,800 next month? Different people will answer differently.