Loss and profit

[CountDuckula]

What if there were no hypothetical situations?

[BIGRED]

[ QUOTE ]
You have two options:
- A certain profit of $3000
- An 80% change at a $4000 profit
Which one would you choose?

Now let's change the options:

- A certain loss of $3000
- An 80% change to lose $4000 (20% to lose nothing!!)
Which one?

It's from some article about Fuzzy logic, and i was curious if pokerplayers choose differently.

[/ QUOTE ]

I haven't read any of the responses. Unless this is some sort of a trick question, the answer can be derived quantitatively.

In the 1st scenario.

100% * $3000 = $3000 or 80% * 4000 = $3200. I take the 80% chance on the $4000.

2nd scenario

Using the same logic, I choose the 100% chance of losing $3000.

[Zaebos]

lol CountDuckula nice post

[PhilipJ]

[ QUOTE ]
lol CountDuckula nice post

[/ QUOTE ]
I didn't notice it until you pointed it out. lol, good one

[Soggy Salmon]

I dislike questions like this. The person posing the question thinks he is clever by pointing out how people will make the "irrational" decision. The "correct" answer to questions like this is an abstract, mathematical answer, yet the question uses real world terms and examples.

Of course, the most profitable decision in the long run is to take the 80 percent chance at $4000. And if I had to make this choice every day, that is exactly what I would do. However, given this choice only once, I would take the sure $3000.

Here's why: An extra $4000 would change my life about as much as $3000 would. In my case I would probably use it to buy an HDTV. The $1000 difference would maybe mean getting a 36" TV instead of a 50" one. But taking the latter option would mean a 20% chance of not getting a TV at all. Because I would enjoy a 36" TV practically as much as a 50" one, the choice is more like: Take a TV or take a 80% chance at getting a TV.

Your question is only good in some theoretical world or for millionaires. If the first choice were given to an unemployed man in desperate need to feed his family, his wife would be completely in the right to kick his ass if he chose the 80% option.