Timeline for Should I take the bet?
Current License: CC BY-SA 3.0
10 events
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| Oct 7, 2013 at 6:33 | history | edited | lejlot | CC BY-SA 3.0 |
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| Oct 7, 2013 at 6:05 | history | edited | lejlot | CC BY-SA 3.0 |
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| Oct 6, 2013 at 22:15 | comment | added | mpr | This answer is incorrect for two reasons. First, the expected income is $200*0.1-20*0.9=2$, so this is a positive expectation bet. Second, if it were not a positive expectation bet, then it would not be a good idea to take it even if you could do it as many times as you want. Yes, you would eventually end up with a positive amount of money, but the expected value of the amount of time until this happens is infinite. Moreover, if you have a finite bankroll, and you play long enough, then with probability $1$ you will eventually go broke. | |
| Oct 6, 2013 at 21:06 | comment | added | Rasmus Bååth | Am I completely off or isn't the expected income 2? $0.1 \cdot 200 + 0.9 \cdot -20 = 2$. Then I'll think it is a quite good bet, though, depending on the factors Glen_b mentions. | |
| Oct 6, 2013 at 14:31 | vote | accept | Prashant | ||
| Oct 6, 2013 at 7:58 | history | edited | lejlot | CC BY-SA 3.0 |
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| Oct 6, 2013 at 7:54 | comment | added | lejlot | In case of a lottery: if you can but as much tickets as you want (you have enough money), the lottery is fair (random) and only you can win (there is no top-winners splitting policy) then once the expected value is bigger then zero, you should buy ALL possible tickets (in case of some number guessing lottery) and you can rest assured that you will win. In more randomized lotteries it is still statistically better to buy as much as you only can (if above conditions hold and that there is true randomization in bought tickets) but with just a probabilistic "guarantees". | |
| Oct 6, 2013 at 7:49 | comment | added | lejlot | If you plan to do this only once then it is not so easy. It depends on what is your "aim", as there is still bigger chance of losing some money, no matter how big is a possible prize. Consider something like this: you have 0.00000000000000000001 chance of winning power of becoming a god, and 0.99999999999999999999 that you will lose your arm. Even though becoming a god should have nearly infinite "reward", and so expected value of this bet is positive it does not mean that a rational person would go for it, as with enormous chance you will lose an arm | |
| Oct 6, 2013 at 7:36 | comment | added | Prashant | Thanks, and if suppose I had to give 10 dollars, then I should take it right? This means that if probability of me winning some lottery is 0.00001 but I get 1 million for it, and the lottery ticket is 5 dolars, then I should buy the lottery? | |
| Oct 6, 2013 at 6:39 | history | answered | lejlot | CC BY-SA 3.0 |