I asked MrsCake if she was she was given the choice between winning either $0 or $50,000 by 50/50 chance, or taking a guaranteed $5,000, which would she do. She said she'd choose the $5,000 instead of risking winning nothing.

That made me wonder what amount that $5000 would have to be for people to end up choosing to go for the chance... what if the guaranteed amount was only $500... or $50?

If you were offered this scenario, what would be the maximum amount of guaranteed cash to give up to have a chance to go for $50,000 if it were a 50/50 you would win it all or nothing?

I think I'd be willing to forego $500 to have a chance to win more... possibly a little more... but once I got up over a grand, I'd have to really start thinking about it.

12/28/2009 4:54:31 PM

.

12/28/2009 4:55:32 PM

I suppose it would depend mostly on how badly you needed that $5000.

12/28/2009 4:55:38 PM

$5,000 won't make a huge difference in my life honestly...I'd just keep doing what I'm doing. $50k would be pretty substantial though. I'd take the risk.

12/28/2009 4:57:54 PM

I'd play the odds


If I had a 50/50 shot of winning 0 or x, or take a guaranteed y, I would take y if y > .5x

If y was worth =< .5x, then I'd spin the wheel and take my chances

[Edited on December 28, 2009 at 4:58 PM. Reason : x]

12/28/2009 4:58:08 PM

i'd take the risk. if you lose, you aren't really losing anything. but if you win...

12/28/2009 4:58:40 PM

Actually you're losing the $5k.

12/28/2009 5:01:45 PM

They teach this in Psych 101. The dumb and/or poor people typically take the risk and the smart and/or rich people typically take the guarantee.

Having said this, I would take the risk. Expected value is $25,000, so it's cool.

12/28/2009 5:02:35 PM

^^ you never had the $5k to begin with so you're not losing it per se.

12/28/2009 5:03:11 PM

Technically you aren't. You have to have it first. If you lose your job, you didn't lose $X that would have been your next paycheck, you just aren't going to get it.

I say roll the dice. Fortune favors the bull.

12/28/2009 5:04:16 PM

^^

Quote :

"you never had the $5k to begin with so you're not losing it per se."

Essentially you do. IF the man says you get $5000 if you chose not to take the risk, at that moment you're $5k richer. You may not have it physically in your hands yet, but it is there.

If someone says, you can take the $5000 or I'll flip a coin and you'll either win $25,000 or nothing, and you win nothing, you lost the $5000 you would have had if you hadn't made the choice.

12/28/2009 5:11:14 PM

That's why I really liked this question. There's a ton of different reasonings behind the various decisions people could choose, and as JCASHFAN said, it also has a lot to do with the situation. I was talking to MrsCake's mom, and she said that if someone had a ton of bills that the $5k could really help with, then they'd be more apt to choose that... especially if they were smart.

BUT A LOT OF YOU HAVEN'T ANSWERED THE QUESTION...

I'm more curious what the highest guaranteed winnings that you would give up to win $50,000? The more I've thought about it, I think I'd probably give up $1k-$2k to win $50k, but not $4k or $5k. But then again, we're about to have a baby.

12/28/2009 5:11:28 PM

I'd give up 25 thou

Its mathematics

12/28/2009 5:19:05 PM

go big or go home!

12/28/2009 5:20:28 PM

According to the psychology class, theres a lot of stupid people on here.


(Note: I didn't ask because of any psychology class, but it makes sense this would be discussed.)

12/28/2009 5:25:11 PM

IMO, anyone who takes 5K over a 50/50 shot at 50K is fucked in the head

but thats just my opinion

12/28/2009 5:26:03 PM

i'd probably go for it. if it were 15K guaranteed or 50/50 chance at 50K i'd probably take the 15K

12/28/2009 5:27:20 PM

IMO, anyone who takes 15K over a 50/50 shot at 50K is fucked in the head

but thats just my opinion

12/28/2009 5:28:16 PM

Quote :

"$5,000 won't make a huge difference in my life honestly...I'd just keep doing what I'm doing. $50k would be pretty substantial though. I'd take the risk."

12/28/2009 5:28:23 PM

^^lol, 15K would help me a lot..although it'd still be a hell of a tough choice, i'll give you that

12/28/2009 5:29:40 PM

Yeah, 15K would be a nice downpayment on the ring.....

12/28/2009 5:31:37 PM

Think of it like this....you have a 50/50 shot of fucking no one or jessica alba, or guarantee that you fuck Maggie Gylenhall

You would have to be crazy (again, IMO) to not take the coin flip there

12/28/2009 5:31:41 PM

ha. no ring

12/28/2009 5:32:09 PM

statistically, yes, if you could do this over and over again, the obvious choice would be to keep going for the money...

but you don't get to do it over and over again. You'd get one shot at this. If someone came up to you and said you could pay them $5k of your money for a coin flip shot at $50k, would you do it? (This question aimed at those who give up the guaranteed $5k to go for $50k.)

When you only get one shot at something, the statistics don't really matter as much... at least not as cut and dry as "Oh, it's 50/50, so sure." There has to be some kind of "risk factor" that should come into play.



[Edited on December 28, 2009 at 5:41 PM. Reason : tried to simplify it for sex pencil]

12/28/2009 5:33:33 PM

plz to proofread?

no fucking clue what that says

12/28/2009 5:35:03 PM

I couldn't fuck Maggie Gyllenhaal on principle.

12/28/2009 5:35:03 PM

Exactly

12/28/2009 5:35:28 PM

I like the XX million dollar russian roulette proposition better. What's the number of chambers you would need to 'roll the dice' for the money?

1 Million is what I've always seen in this context, but I assume adjusting for inflation it might be more like 5 or 10.

1/100 would do it for me.

12/28/2009 5:44:29 PM

here's one.

you're walking down the street w/ a friend and a man comes up to you and says "i have $5000 to give away. tell me how much of it you want, and i'll give the rest to your friend if he agrees to the amount you specified; if he does not you will both get nothing".

do you ask for $2500 to be safe? do you ask for more? if you're the friend, do you accept less than $2500?

12/28/2009 5:53:16 PM

i think that scenario was on here as a news article, where someone did something very similar to this with sober people and individuals who were drunk and found that the motivation to decline a small offer to the second individual was more out of revenge/anger and that outweighed the desire to get some money

12/28/2009 6:01:36 PM

I'd take the 5K and turn it into a whole lot more.

12/28/2009 6:04:05 PM

^^^yeah 2500. definitely.
without a second thought.

in my head i dont really see any other answer.

as a matter of fact i was wondering what sort of other answers would even be given until i read your questions

[Edited on December 28, 2009 at 6:05 PM. Reason : sfdssfsdfd]

12/28/2009 6:04:39 PM

^^^sounds like the prisoner's dilemma.

Quote :

"Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects from the other) for the prosecution against the other and the other remains silent (cooperates with the other), the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?"

[Edited on December 28, 2009 at 6:06 PM. Reason : ^]

[Edited on December 28, 2009 at 6:06 PM. Reason : GAME THEORY ITT]

12/28/2009 6:05:48 PM

^that is trickier!

12/28/2009 6:06:41 PM

I would love to take a game theory class...

12/28/2009 6:16:09 PM

5000 would make a huge difference in my life right now but i'd still go for the 50k

12/28/2009 6:28:55 PM

^

12/28/2009 6:35:35 PM

i have a new, similar question
you and your friend meet a man who asks you both if you would like to play a game. the man has two envelopes each containing a normally distributed amount of money from $1 to $100 dollars. you will each get an envelope and then can trade envelopes between yourselves if you both agree but can not communicate how much money you have in your envelope.

at what point would you trade, i.e. how much money would you need in the envelope to be happy?
(there is a discrete correct answer to this question)

12/28/2009 6:35:38 PM

that question is based on your willingness to gamble, so no there is not a discrete correct answer.

maybe a discrete optimal answer, but not a correct answer.

12/28/2009 6:37:53 PM

^^$51

[Edited on December 28, 2009 at 6:39 PM. Reason : a]

12/28/2009 6:38:22 PM

no, there is a clear correct answer because i said the money is normally distributed

it is not $51, remember that you both have to want to trade

12/28/2009 6:39:38 PM

so wait, is there $100 total in both envelopes, or can each envelope contain anywhere from $1 t0 $100?

I'm confused

12/28/2009 6:41:02 PM

ignore this post

[Edited on December 28, 2009 at 6:41 PM. Reason : a]

12/28/2009 6:41:38 PM

each envelope can contain an amount from $1 to $100

12/28/2009 6:43:05 PM

I too, would love to take a class on game theory.

12/28/2009 6:43:09 PM

ok. what does normally distributed mean? what would abnormal distribution be?

12/28/2009 6:44:47 PM

its that bell curve thing

12/28/2009 6:46:03 PM

an extra $5k in my bank account wouldn't make any difference. I wouldn't really buy anything that I wasn't already going to buy...I'd just make interest/dividends on an extra $5k.

an extra $50k would make a difference...I would still save most of it, but I'd go buy something...so I'd roll the bones on $50k without even hesitating.


now, back when I was a broke college kid, this would've been a real dilemma, and I would've had to give SERIOUS consideration towards the bird in the hand.

12/28/2009 6:47:11 PM

wiki says it doesn't matter if you switch or not.

I wish I knew enough to come up with that answer myself

scratch that

[Edited on December 28, 2009 at 6:48 PM. Reason : ]

12/28/2009 6:47:24 PM

the proof is not that complicated, i figured it out before spending any time with game theory

just go through a couple iterations of when you would want to trade and when your friend would want to trade and see what the limit is as you go through those iterations

[Edited on December 28, 2009 at 6:49 PM. Reason : .]

12/28/2009 6:49:01 PM