Re: Lottery with free tickets to another lottery. Calculate EV?
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1. Lottery B has an EV of 0. A has an EV of 400/550 + 1/5*(0) - 1 = -0.27
2. B: EV = 1. A = 1 + 1/5*(1) - 1 = 1/5.
Thus B > A in both cases.
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Why are you adding 1/5*(0) when calculating A's equity in the first scenario. You get a free lottery B ticket. Your calculation would be correct if you had to buy the lottery B ticket.
Correct answer should be 400/550 + 1/5*(1) -1 = -0.07
Your calculation for scenario 2 is wrong as well, although the answer that B is better is correct for both.
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