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re: 20k guaranteed or coin flip for 100k?
Posted on 7/1/16 at 8:56 am to castorinho
Posted on 7/1/16 at 8:56 am to castorinho
quote:
Two boxes left, one is $1, the other is $1,000,000. How high would the offer have to be for you to take it vs opening the box?
that happened in real life. Dude turned down 400+K. His box had a dollar in it.
Wow.
Unless I was an absolute OT baller, I don't think I could ever turn down a guaranteed $416,000 (although I know it would a lot less with taxes).
The notion of leaving with only $1 would be way too much for me to overcome.
0
Posted on 7/1/16 at 8:56 am to DrownEmTide
Only a poor person would flip.
Posted on 7/1/16 at 8:58 am to RogerTheShrubber
quote:If you don't have an outright need for $20k(i'm talking you're in financial woes or whatever), then that is absolutely how you should look at it.
Some of you are overthinking this.
Posted on 7/1/16 at 8:59 am to Niklaus Mikaelson
quote:
I'll take the 20. I'll turn it in to 200k within a year.
Posted on 7/1/16 at 9:00 am to TigerstuckinMS
quote:
See, I disagree. When you start playing the aversion to risk angle, you screw yourself. You flip the goddamned coin because that's what results in the best overall outcome in the long run. Yes, I understand that there's only one coin flip and the "long run" isn't strictly applicable here.
What if it was 20 million and 100 million instead of thousands? You still flipping the coin?
I agree that taking positive EV plays throughout your life is the best way to go and you should come out ahead, but sometimes it might make sense to veer from the higher EV.
Posted on 7/1/16 at 9:00 am to StrongBackWeakMind
quote:Faulty logic
I agree. 100% > 50%
Posted on 7/1/16 at 9:02 am to Jake88
quote:My god.
Now, most people will take the flip. That's why most are idiots and choose poorly throughout their lives.
Having the audacity to call someone else an idiot is truly spectacular.
Posted on 7/1/16 at 9:03 am to BiggerBear
quote:
But according to the OP, you have $20K at stake. So the question is, really - Would you pay $20K for a 50% chance at $100,000?
Right. That's how you have to look at it.
I'd take the 20K. It might not be life changing but it's guaranteed.
Posted on 7/1/16 at 9:04 am to LSU-MNCBABY
quote:
The expected value of a 100k coin flip is 50k.
Any rational thinker should take this situation.
Not if you only get to do it once
Posted on 7/1/16 at 9:04 am to The Seaward
quote:
What if it was 20 million and 100 million instead of thousands? You still flipping the coin?
I take the $20M in that case. That's life-changing money.
Just like I'd take the $416K over the 50/50 shot at $1M in the Deal or no Deal post, although the $416K is a lot closer to the expected value than a 20/100 scenario.
$20K though... that's not changing my life enough to not gamble on the $100K.
Posted on 7/1/16 at 9:07 am to LSUBoo
The amount of people saying flip for 100k tells me exactly how many uneducated degenerates are on this website or how many people are richer than thought. I doubt it's the latter.
Probably the same people who I see in gas stations buying scratch offs
Probably the same people who I see in gas stations buying scratch offs
Posted on 7/1/16 at 9:08 am to Niklaus Mikaelson
quote:
I'll take the 20. I'll turn it in to 200k within a year.
You a drug dealer, brah?
Posted on 7/1/16 at 9:08 am to LSUBoo
quote:
$20K though... that's not changing my life enough to not gamble on the $100K.
I can understand that line of thinking. For me it's tough to pass up the guarantee even though it's not statistically the smart choice.
But you only get to do it once. It's not like you get to repeat the exercise over and over in which case the choice to gamble would be the only rational choice. With a sample size of one it's debatable.
Posted on 7/1/16 at 9:08 am to tom
If 20k is life changing then you need to change your life
Posted on 7/1/16 at 9:08 am to DrownEmTide
quote:
Personally, I flip the coin.
This is a bad hypo, IMHO. The valuation is not right. The flip is worth, on paper, $50k. So, your CBA and ROI are all out of proportion. Only the truly, almost self-defeating, overly conservative are going to take $20k.
It gets interesting if you make it $40k versus the coin flip. Even more interesting if you make it $50k or even $60k. That's when you find your gamblers/risk-takers out there. At $50k, I take the guaranteed every time. At $60k, only the reckless flip the coin, for example.
So, long story short - I flip the coin for $100k versus taking the $20k guaranteed. That's basic economics.
Posted on 7/1/16 at 9:10 am to Ace Midnight
quote:
So, long story short - I flip the coin for $100k versus taking the $20k guaranteed. That's basic economics.
Not when you only get to do it once
Posted on 7/1/16 at 9:10 am to TexasTiger34
quote:
The amount of people saying flip for 100k tells me exactly how many uneducated degenerates are on this website or how many people are richer than thought. I doubt it's the latter.
Posted on 7/1/16 at 9:10 am to TigerstuckinMS
quote:
See, I disagree. When you start playing the aversion to risk angle, you screw yourself. You flip the goddamned coin because that's what results in the best overall outcome in the long run. Yes, I understand that there's only one coin flip and the "long run" isn't strictly applicable here.
It doesn't change the fact that flipping the coin is provably the better choice, but emotion has led many people to make the wrong choice.
That, or bad math.
Take it to the extreme then. $20k guarantee or a coin flip where heads wins you $1MM but if it's tails you owe $900k. EV of the flip is still $50k, so you flipping?
Posted on 7/1/16 at 9:11 am to LSU-MNCBABY
quote:
Someone is downvoting us for knowing probability and expected values
Help me understand why the $50k expected value is still better than $20k guaranteed?
If someone takes the flip and loses, the actual value is zero, right? Therefore actual value is $20k > 0 if you select the guaranteed option.
*I'm approaching this with the mindset that I need money as opposed to just having extra.
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