Loss and profit

[AbelM]

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.

[Dan Mezick]

This is a basic Behavioral Finance question. It's interesting to note that most people go for the "sure thing" even when it's less of a payoff. Most people have a had time figuring out how to spend "theoretical money".

The Journal of Behavioral Finance

[geek]

People tend to be risk-adverse when facing a gain, and risk-seeking when facing a loss.

I'd imagine most good poker players are able to avoid this tendency, but I'm always reminded of it anytime a blackjack player insures his blackjack against a dealers ace.

[geek]

I'd say one of the biggest poker applications is being able to cash in on someones "low bankroll flameout".

[Al_Capone_Junior]

The EV of taking $3000 straight up is $3000.

The EV of an 80% chance at $4000 is $3200.

Reverse it for the loss question, it's the same thing tho.

So I'd take the certain loss of $3000 but take the 80% chance at $4000 based purely on EV.

Now if I was near broke, I might change my answers.

al

[Al_Capone_Junior]

"low bankroll flameout"

Isn't that kinda like the...

"Kamakaze all-in" ??

al

[Leo Bello]

[ QUOTE ]
The EV of taking $3000 straight up is $3000.

The EV of an 80% chance at $4000 is $3200.

Reverse it for the loss question, it's the same thing tho.

So I'd take the certain loss of $3000 but take the 80% chance at $4000 based purely on EV.

Now if I was near broke, I might change my answers.

al

[/ QUOTE ]

Yeah, it depends on your bankroll (or on your savings in this case). It is EV positive the 80% of 4000. If I have savings around 50K, I would certainly go for the 4000 option. But If I need those 3K to pay my bills, I wouldn´t blink before getting it.

[Victor]

this seems obvous to me. In the first case take the certain 3000 and in the 2nd case take the 20% chance at losing 0.

[moondogg]

[ QUOTE ]
this seems obvous to me. In the first case take the certain 3000 and in the 2nd case take the 20% chance at losing 0.

[/ QUOTE ]

Now pretend you have to do it 100 times over and over again. Which would you do then?

[sammy_g]

[ QUOTE ]
You have two options:
- A certain profit of $3000
- An 80% change at a $4000 profit

[/ QUOTE ]
I'll PM you with my choice and my Neteller info. Thanks.