I think what the person decides to do depends on how significant the
amount of money in question is to them. For example if the prize given was multiplied by one thousand and the prize offered was $1,500,000 instead of $1,500 and you could gamble and get between $123,000 and $3,210,000 then I am sure Bob's decision wouldn't be a no-brainer.
--- In vpFREE@yahoogroups.com, Bob Dancer <bobdancervp@...> wrote:
>
>
>
>
>
>
>
> On last
> night's "Gambling with an Edge," I posed a question that Munchkin and
> I plan to address on the air next Thursday. This might well be a subject that's
> appropriate for discussion here. I don't intend to participate in this
> discussion other than setting it up --- although I will tell you where I stand
> on the issue --- but rather "save" my analysis for "on the air"
> next week.
>
>
>
> In
> September, the Palms Friday-Saturday drawings give the winners a choice. The
> winners can select a guaranteed $1,500, or they can play a game. In this game,
> there four envelopes with a 0, 1, 2, 3 inside in some order. Players arrange
> the envelopes (not knowing what's inside), and then read off the number in
> dollars. The greatest amount you can win is $3,210 and the smallest is $123.
>
>
>
> The average
> (mean) of the equally-likely choices is $1,666.50. The average (median) of the
> choices is anything between $1,320 and $2,013, including, of course, the
> fallback prize of $1,500.
>
>
>
> What we
> call EV (or ER) in video poker is $1,666.50 --- if we're willing to
> "gamble." You could give up about 10% of that, chicken out, and keep the $1,500
> with no gamble.
>
>
>
> To me this
> is a no-brainer. I'd go for the higher-EV option 100% of the time. I'd do it if
> the choice were $1,666.50 versus a guaranteed $1,650. This is not a close
> decision for me. I'm sure many players with chicken out and keep the $1,500.
>
>
>
> What would
> you do? And why?
>
>
>
> I don't
> think there are any "cash versus free play" differences between the
> two choices. Even if there are in the casino, let's ignore them for the sake of
> this discussion.
>
>
>
> Bob
>
>
>
>
>
> [Non-text portions of this message have been removed]
>
