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suppose you have been presented with an opportunity to play a coin flipping game with the

following payoffs: heads, you get $10, but tails, you pay $5. Would you play?
Expected earnings: P(head)*10 P(tail)*5
=0.5*10-0.5*5
=2.5 (since gains is positive one must play)
After you've decided, suppose we change the amounts to $1000 for heads, but now you have to
pay $500 for tails. Any takers?
0.5*1000-0.5*500
=250(expected gains just got bigger)
One last game, heads for $100,000, but if the coin lands on tails, you must pay $50,000. So,
would you play this game?
0.5*100000-0.5*50000
=25000 (gains got even bigger, so one must play)
Better yet, under what circumstances would you play this game?
Even if gains got bigger so did the amount for losing, you have the probability to lose 50000. So
if u just play rationally u will go for it, but if u are risk adverse then u will fear losing 50000. So
it simply depends on the risk taking ability of the user. If you flush out the idea of risk then the
person will definitely play the game until the expected gains comes out to be positive.
(As you can tell, this is another rendition of our current example, but I think it helps to better
flush out the idea of risk).

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