Let’s say that you were offered one of the following choices. This choice will only be offered once, and you have no expectation of having a similar choice in the future (since this is a contrived situation that’s unlikely to come again).
Which would you choose, and what is your reasoning? (options in poll)
Probably G) 40% chance of winning $50,000. This sum would mean something to me. The lower sums, not so much, and the higher ones risk/reward starts to drop off.
30% chance at $150,000 for the same reason Leaf gave.
I’d go for the middle, 50% for $15,000. I have an even up chance of winning, the lesser amounts don’t mean much.
On reflection I’d probably be tempted for the $150,000 or higher. But at 1% the 50 mil seems to risky.
I’m gonna go with 30%/$150,000. Decent odds, and enough money to get me even, plus a hundred grand on top.
I’m going for the $500k, since that’s pretty much “retire now” money, given my lifestyle. Not that I’d necessarily actually retire, but it’d make a big difference to me to know that I could.
$500,000 would be ‘retire now in style’ for me. But I’m still a little hesitant because I want to win something.
The best risk/reward ratio is 1% for 50 million.
That being said, I don’t know if I’d have to guts to pick that one. I’d probably go for the 40% for 50k option.
I voted 40% chance at 50k.
Obviously, the expected return goes up, but that’s not a very effective way of determining what you should do. Rather, we need to measure the utility of the money against the chance of winning it. That is, the difference in what one can do with choosing 500 over 150 is larger than 50k over 15k, even though they’re the same ratio. By that, the utility to chance ratio maxes at 5k, but it stays fairly high and elbows sharply between 50k and 150k. So, thinking about it, anything less than the 1.5k option would be silly no matter how desperate you are, but anything above the elbow point is very high risk, so 50k seems like the best option from that perspective.
Thinking about it on a more personal level, it makes sense to try to pick the lowest number that will have a noticeable impact on my life so I have the highest chance of getting that impact. Thus, in my situation, 5k or less really isn’t enough to have a noticeable impact on my life, so that’s not really a good option. But looking at 15k and 50k, we start to reach numbers that could and 150k definitely would, so that’s too high and pretty much narrows it to those two options. As such, I again go with the 50k option because, while 15k would be nice, it would be more of a pay off my car type of nice, whereas 50k would be a good chunk of a down payment on a new place nice, which is many times more impactful and, again, the next step up isn’t that many times moreso, so it still looks like 50k is the best option.
Sure. Powerball has a great risk/reward ratio, but I don’t buy a ticket expecting to win. In this case you can pick some very favorable odds. And in this case there’s no monetary risk, you won’t lose anything. The ‘risk’ is all about getting nothing when you could have greatly increased your chances of winning something.
Actually, on thinking about it more… How long do we have to make the decision? Because even if we only ever play the game once, we could still hedge by making side bets. It shouldn’t be too hard to find enough buyers to turn the 1% at 50M option into a guaranteed 1M or so.
20% chance for $500,000 for the same reason.
Going with 15K. 50K would be nice, but considering that my bank account rarely exceeds 3 grand, 15k would be huge.
I guess I’ll be the one with the 10% vote for $1.5M. Significant sum of money with what I still consider to be very high odds. In my head, at least, 1/100 odds are not very high, and therefore not worth the chance to me no matter how much money it is.
I should say, not worth the chance when I have the option of choosing much better odds for what still qualifies as “quit my job and live off of it” money, which none of the other options do for me.
Like more than a few people, I’d go for the 20/500K option. After taxes the lesser sums would be nice but not that impactful. 500K is a new house, plus stuff, even after the IRS and Franchise Tax Board take their due. 1 in 5? I’ll take those odds any day, especially since I am risking nothing.
1.5M is enough for me to retire now without having to watch my pennies too closely. Second choice would be to take the $50 or $150 and go to lunch or dinner on it.
Hey, somebody wants to give me $50? Fine with me. If I chose any other option, and didn’t get the money, I would feel just awful. That’s the real reason I don’t buy lottery tickets.
I went with the 50% offer. Mathematically, I know the offers just keep getting better but psychologically I don’t like having the odds of winning against me.
20% chance at half a million for me. I figure that if I know nothing about a subject, that’s the equivalent of “guess which of the five senses I’m thinking of”, and I like my odds there better than “guess which of my ten toes I’m thinking of”. The “average” in the former situation would be $100,000, while it would be $150,000 in the latter – less than twice as much for half the likelihood.
Fifty million would seem like too much to handle, so I’d go with one of the next two potential payouts. If the 10% chance was for $2.5 million to $10,000,000 or so, though, I’d pick that.
I’d like to buy a vowel.