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My favourite probability problem

Posted By: Matt Cohn-Geier
Date: Saturday, 29 August 2009, at 2:37 a.m.

In Response To: My favourite probability problem (joe freedman)

What I am getting at is this:

You know that if you take the $1K you will very probably end up with $1K. You know that if you do not take the $1K you will very probably end up with $1M. Your expectation on taking the $1K is close to $1K, your expectation on not taking the $1K is close to $1M.

Can it be right to make a hugely -EV decision? Can it be right to take one course of action which very probably results in $1K and forgo the other course which very probably results in $1M?

If so, how do you explain it?

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