Help me settle this dispute (Simple EV problem)

[punter11235]

You are only arguing semantics here.
It sounds incorrect to me to call refusing the bet "losing money" but its only language thing and you may call diffrence in EVs in any way you like.

[btmagnetw]

this isn't -EV in the same way that deciding not to flip for your entire bankroll with a 0.1% edge isn't -EV

[PantsOnFire]

I think this is along the lines of similar questions like:

"If you are winning poker player, is it -EV to sleep at night or take a holiday?"

"If you are losing poker player, is it +EV to sleep at night or take a holiday?"

[metsandfinsfan]

sklansy bucks for the win

[cianosheehan]

Thanks again for the replies. The whole conversation between my friend and I arose because I read a thread on 2p2. The thread posed the question of if you had a +10% edge on a coin flip, what would be the max you would wager. I asked my friend the question and she said that she wouldn't wager anything. I told her that she's losing money with that policy, and the argument proceeded from there.

So as Punter says, the argument has been blurred in semantics but what my intention was, was to show my friend how she is 'losing out' (not necessarily 'losing money' per sé, because obviously no one is reaching into her pocket and taking her cash).

[SumZero]

[ QUOTE ]
Thanks again for the replies. The whole conversation between my friend and I arose because I read a thread on 2p2. The thread posed the question of if you had a +10% edge on a coin flip, what would be the max you would wager. I asked my friend the question and she said that she wouldn't wager anything. I told her that she's losing money with that policy, and the argument proceeded from there.

So as Punter says, the argument has been blurred in semantics but what my intention was, was to show my friend how she is 'losing out' (not necessarily 'losing money' per sé, because obviously no one is reaching into her pocket and taking her cash).

[/ QUOTE ]

Your friend is demonstrating behavior that makes them either:

1. an idiot

2. the world's most risk adverse person ever


I mean sure if your friend's net worth is $50,453.43 and immediately after the coin flip is done she is killed if she has less than $50,450.00 then she's right to refuse the coin flip. But other than that case (I.e., less likely than being correct to fold AA pre-flop) that 50% chance of $50,464.43 and 50% chance of $50,443.43 or 100% chance of $50,453.43 presents only one correct answer.

What's interesting is most people are somewhat idiotic like your friend and if you instead phrased it differently like you have two choices:

Choice 1: You win $20

Choice 2: 50% of the time you win $10 and 50% of the time you win $31

your friend would have probably done the correct decision.

People make all kinds of illogical decisions around risk and treat found money differently than their own money. And on the one hand it is sad and troubling. And on the other hand... profit.

[DrVanNostrin]

[ QUOTE ]
Thanks again for the replies. The whole conversation between my friend and I arose because I read a thread on 2p2. The thread posed the question of if you had a +10% edge on a coin flip, what would be the max you would wager. I asked my friend the question and she said that she wouldn't wager anything.

[/ QUOTE ]
Aside from bankroll considerations there's no way to justify this.

[ QUOTE ]
People make all kinds of illogical decisions around risk and treat found money differently than their own money.

[/ QUOTE ]
Well put.

[cianosheehan]

Her argument was based arround the fact that she is not willing to risk any amount of money on a +10% wager, when the coin is only going to be flipped once. It was this element that prolonged the argument, because she valued risk aversion much higher than the EV of a single coin flip. Not necessarily because she doesn't know the concept of +EV, but because there was no guarantee of outcome on a single flip. I asked her what +% would she need in order to take the flip, but she wasn't able to answer. For the same reason I'm sure - it would still be a single flip. She did however say that she would flip the coin 100 times. But definitely not once. As was said already, beyond bankroll issues there really is no way to justify this.

She argued that since the coin flip is not guaranteed profit, why should she risk $10 or any other amount, when she can have the guarantee of keeping her $10, $1, 10 cent or whatever other amount she wasn't willing to wager.

[kinghippo423]

Next time you see her, ask her if she would accept to play this "one coin-flip" 50 times.

I hope she says yes...

[qpw]

[ QUOTE ]
Her argument was based arround the fact that she is not willing to risk any amount of money on a +10% wager, when the coin is only going to be flipped once. It was this element that prolonged the argument, because she valued risk aversion much higher than the EV of a single coin flip. Not necessarily because she doesn't know the concept of +EV, but because there was no guarantee of outcome on a single flip. I asked her what +% would she need in order to take the flip, but she wasn't able to answer. For the same reason I'm sure - it would still be a single flip. She did however say that she would flip the coin 100 times. But definitely not once. As was said already, beyond bankroll issues there really is no way to justify this.

She argued that since the coin flip is not guaranteed profit, why should she risk $10 or any other amount, when she can have the guarantee of keeping her $10, $1, 10 cent or whatever other amount she wasn't willing to wager.

[/ QUOTE ]I'm going to go against the flow here and agree with your friend.

Assuming she does not expect to get a significant number of similar offers during her lifetime her reasoning is absolutely correct.

Talking about +EV which is, in most cases, and certainly this one, a statistical concept involving overall expectation over a series of events is nonsensical when there is only going to be one event.

I suspect that if someone offered you the same deal but the bet was your next 5 years income you would very rapidly come around to your friend's way of thinking.