Apparently you are considering the main benefit of option 1 is the financial savings. However, keep in mind that with option 1 you have to pay for a master's degree, while with option 2 you could go straight to the doctorate - so I think the finances will be the same in the end. However, if you complete a good master’s degree in option 1, your chances of being admitted to a good doctoral program are also most likely the same in the end. I would still prefer option 2 because name schools open doors in general.