Timeline for Expected value as decision criterion in the context of rare events
Current License: CC BY-SA 2.5
6 events
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| Jan 3, 2011 at 9:14 | history | edited | Jason | CC BY-SA 2.5 |
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| Dec 31, 2010 at 16:10 | comment | added | Kevin O'Bryant | In the backgammon version of the paradox, the correct expected value not only doesn't coverge, it's an alternating series with increasing absolute value. That means that the correct decision relies very sensitively to precisely what financial cutoff you take. I suppose the correct thing to do, then, is to incorporate a smoothly decreasing likelihood of actually getting paid one's winnings, and a possibly different smoothly decreasing likelihood of actually paying one's losings. Some sociologist must have looked at which bets actually get paid! | |
| Dec 31, 2010 at 16:05 | comment | added | Kevin O'Bryant | Backgammon (played for money with a doubling cube) has the same non-converging-expected-value problem, and people do play that. | |
| Dec 31, 2010 at 16:02 | history | edited | Jason | CC BY-SA 2.5 |
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| Dec 31, 2010 at 16:02 | comment | added | Qiaochu Yuan | The St. Petersburg paradox can be resolved by an argument which doesn't resolve the lottery argument. All you have to do is assume any reasonable cutoff for the total amount of money you can actually be paid, and the expected value of the game becomes much smaller. But the quantities which are paid out in standard lotteries are, in fact, feasible to pay out. | |
| Dec 31, 2010 at 15:57 | history | answered | Jason | CC BY-SA 2.5 |