Tuesday afternoon money quiz

[Flaherty]

A generous benefactor has given you $20,000. There is a catch. You have to choose between the following two options:

#1: He takes $5,000 back from you, and you walk away with $15,000.

#2: You flip a coin. If it is heads, he takes nothing from you and you walk away with $20,000. If it is tails, he takes it all back from you and you walk away with $0.

[roger]

expected payoff for #1: $15,000
expected payoff for #2: $10,000

I'd take option 1.

[Upchurch]

Take the money and run.

I am all about taking the risks and stuff, but 50/50 odds on $15,000 for a 33% gain isn't good enough.

[LW]

I'd take the 15000.

The other choice would be gambling with a 50% change of winning 5000 and a 50% change of losing 15000. A no brainer.

[Upchurch]

Originally posted by roger
expected payoff for #1: $15,000
expected payoff for #2: $10,000
Expected payoff on #2 would be the full $20,000

[Elaborate]

Originally posted by Upchurch
Expected payoff on #2 would be the full $20,000

No, the expected payoff is the average between the heads payoff and the tails payoff, becuase that is what you can expect to gain after many repeated trials.

[Upchurch]

Originally posted by Elaborate

No, the expected payoff is the average between the heads payoff and the tails payoff, becuase that is what you can expect to gain after many repeated trials. Okie dokie. (http://www.public.asu.edu/~durham/chapter9newedho2pp.pdf)

[glee]

Originally posted by Flaherty
A generous benefactor has given you $20,000. There is a catch. You have to choose between the following two options:

#1: He takes $5,000 back from you, and you walk away with $15,000.

#2: You flip a coin. If it is heads, he takes nothing from you and you walk away with $20,000. If it is tails, he takes it all back from you and you walk away with $0.

Previous posters have given the correct odds, so I don't see the point of this.
Unless:

- if the benefactor has given you the money, you can simply keep it

- if the coin is double headed, you play.

[Nyarlathotep]

I noticed you changed it.

However I would still take the $15000, because I still see it as a gamble between a 100% chance of $15,000 and a 50% chance of nothing. I would rather go for the guaranteed money because, despite the fact that I live in Nevada, I am not a gambling man.

[jayrev]

Originally posted by Upchurch
Okie dokie. (http://www.public.asu.edu/~durham/chapter9newedho2pp.pdf)

I couldn't get your linkie dinkie to workie durkie.