Consider the following lottery:

There are two states of nature, good and bad.

Lottery A pays out 1000 dollars in a bad economy, and 3000 dollars in a good economy.

Lottery B pays out nothing in a bad economy, and 4000 dollars in a good economy.

Both good and bad are equally likely. The expected value in both cases is 2000 dollars.

Are you indifferent between the two?

What is the actual trade-off?

Under what conditions will you make the trade-off?