A worker accepts a dangerous job after being offered an annual bonus of $200. Th

Question

A worker accepts a dangerous job after being offered an annual bonus of $200. The probability that the worker may be killed in one year is 1 in 10,000. This is known to the worker. The bonus may therefore be interpreted as a self assessment of life with a value equal to $200, divided by 1/10,000 or $20 million. Is the worker more or less likely to accept the job if presented with the statistically nearly identical figures of a $10,000 bonus over 50 years(neglecting interest) and a 1/200 probability of a fatal accident during the periods?

Explanation / Answer

The worker is less likely to accept the job with offer of $10,000 and 1/200 probability of a fatal accident. In the first offer the probablity is 1/10000. It remains the same in the subsequent years. The probablity of 1/200 represents higher risk.

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