Instant $1 Million or 50% chance of $100 Million

[Jagdeep]

@Vinay, Lets assume you are down $5 million in a day playing poker. Given the same options, will you still choose instant 1mill??

[Sachin111]

I will happily take instant $1 Million and never regret it. Expected utility is what should drive the decision and not the expected value. In daily poker games, these two terms have almost the same meaning; so it does not really matter there. But, in this case, it does. An even extreme example: how about an Instant $1 Billion vs 50% chance of $100 Billion? Are people still wiling to decide based on EV? I guess not. People who make their decisions solely based on EV should read the St. Petersburg paradox just to see how misleading EV calculations could practically be.

[vinay_suchede]

I will happily take instant $1 Million and never regret it. Expected utility is what should drive the decision and not the expected value. In daily poker games, these two terms have almost the same meaning; so it does not really matter there. But, in this case, it does. An even extreme example: how about an Instant $1 Billion vs 50% chance of $100 Billion? Are people still wiling to decide based on EV? I guess not. People who make their decisions solely based on EV should read the St. Petersburg paradox just to see how misleading EV calculations could practically be.

@jagdeep I really didnt think deep enough on this .. didn't wana whack my brain on it.. but agree with Sachin's contention here.. another extreme example how about instant 100Rs v half chance at 5,000Rs.. I will take the half chance here..