Your appetite for risk shifts with two variables: whether you are facing gains or losses, and whether the outcome is likely or unlikely.
With high-probability gains, you prefer certainty. With high-probability losses, you may gamble to avoid the sure loss. The reference point sets the emotional tone.
With low-probability gains, you can become risk seeking—buying small chances at large rewards. With low-probability losses, you can become risk averse—paying to eliminate a tiny chance of disaster.
This “fourfold pattern” explains why insurance and lotteries coexist. It also explains why the same person can look cautious in one domain and reckless in another.
Once you map choice to quadrant, behavior becomes less mysterious. People do not have one risk preference; they have several, triggered by framing and probability.