Re: Do you take the coin-flip?
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I'd take the guaranteed cash. Not because I'm risk averse, but simply because my utility does not scale linearly with the cash reward.
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Am I a moran because I have no clue what you just said? [img]/images/graemlins/confused.gif[/img] [img]/images/graemlins/confused.gif[/img] [img]/images/graemlins/confused.gif[/img]
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Nah, just means you haven't had a grounding in economics.
Money is money, but utility is the personal value or benefit to you of that money (or any other goods or servcies).
Consider a lollipop. It's worth the same amoung of money to anyone, but the utility of that candy is a lot higher to a hungry little kid than to a middle-aged diabetic.
Likewise, specific cash amounts have different worth to different people. 300k and 75k would have the same basic effect on my life. Very nice, but not permanently life changing. So the difference in utility between the two is not equivalent to the difference in cash.
When deciding the expected value of the decision here, one has to look at utility, not money, so math alone doesn't decide it.
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