Just what is the Certainty Equivalent (CE)?
I have searched for definitions, and here's what I found:
1) Certainty Equivalent: A guaranteed return that someone would accept,
rather than taking a chance on a higher, but uncertain, return.
2) The amount of payoff that a player would have to receive to be
indifferent between that payoff and a given gamble is called that
gamble's 'certainty equivalent.'
Note the references to "someone" and "a player." Thus, the CE is a
subjective measure, and the CE for a given play is likely to be
different for you than it is for me or anyone else.
To actually come up with a meaningful value for CE for a play requires
each player to somehow quantize his/her emotional tolerance of Risk. I
don't know how to do that. Before using CE, I suggest someone should
come up with some way to assign a number to one's emotional tolerance of
risk.
The first example used for this thread was dealt 22266 in FPDW. Even
though the EV of holding just the deuces is slightly greater than the
value of the quints, I have always recommended always holding the
quints. This falls in nicely in my definition of Optimum Play.
Only a dedicated pro with a large bankroll should discard the 66.
Dan
--
Dan Paymar, developer of "Optimum Video Poker" software
Visit my web site at http://www.OptimumPlay.com
"Chance favors the prepared mind" ~ Louis Pasteur
Posted by: Dan Paymar <Dan@OptimumPlay.com>
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