Thread Rating:

Poll

2 votes (50%)
2 votes (50%)

4 members have voted

Chodempole
Chodempole
Joined: Oct 13, 2014
  • Threads: 18
  • Posts: 40
August 5th, 2015 at 2:22:33 PM permalink
What's the math that supports the smarter decision?
TomG
TomG
Joined: Sep 26, 2010
  • Threads: 11
  • Posts: 1824
August 5th, 2015 at 2:33:42 PM permalink
0.0019 x $176,000 = $334.40 per chance
$334.40 x 11 chances = $3,678.40

0.0152 x $25,000 = $380 per chance
$380 x 16 chances = $6,080

this assumes you can win the jackpot multiple times. If not the value of the $25,000 drawing would drop by a few pennies

Fairly confident that is accurate, but someone please correct me if I'm wrong
PeeMcGee
PeeMcGee
Joined: Jul 23, 2014
  • Threads: 1
  • Posts: 115
August 5th, 2015 at 7:15:17 PM permalink
…and the numbers if the jackpots can only be won once.

E[first option] = (1 – (1 – 0.0019)11) * 176000 = 3643.65
E[second option] = (1 – (1 – 0.0152)16) * 25000 = 5433.70

The second option is the way to go.
Chodempole
Chodempole
Joined: Oct 13, 2014
  • Threads: 18
  • Posts: 40
August 6th, 2015 at 3:25:42 AM permalink
So what do the final numbers represent?
PeeMcGee
PeeMcGee
Joined: Jul 23, 2014
  • Threads: 1
  • Posts: 115
August 6th, 2015 at 7:59:17 AM permalink
Quote: Chodempole

So what do the final numbers represent?


The expected value of the return—or, on average, how much money you’ll make from each option.

So if you define “smarter decision” as the one which provides the greater return—go with the second option.

But evaluating money decisions like this may not always be idea—they can be complicated with crap like diminishing marginal utility of money and crap. Consider I offer a 100% chance at $10 million or a 1% chance at $1.5 billion. I think most people would take the $10 million even though the latter option has a higher expected return. It depends how you value money and whatnot.
Chodempole
Chodempole
Joined: Oct 13, 2014
  • Threads: 18
  • Posts: 40
August 6th, 2015 at 8:12:04 AM permalink
True. $1000 to one guy is $100 to another.
Chodempole
Chodempole
Joined: Oct 13, 2014
  • Threads: 18
  • Posts: 40
August 6th, 2015 at 8:22:27 AM permalink
But the other issue is that with such low percentages, luck plays a huge role. So do you just let that extra 1.3% go and hope to win more money or use that extra to try and hit multiple smaller jackpots?

  • Jump to: