Examples, solutions, videos and lessons to help High School students learn how to weigh the possible outcomes of a decision by assigning probabilities to payoff values and finding expected values.
The expected value or mean of a discrete distribution is the long-run average of occurrences. 0000003320 00000 n Plugging values on either side of and in between these critical values (e.g., p = 0,p = 1,p = .5) into her expected utility with insurance (√ 392−300p) and her expected utility without insurance (20−10p) and comparing them confirms that she will buy insurance for .1 < p < .9 but will not buy insurance for p < .1 or p > .9. But if it rains on the day of game, they won't sell any tickets and the club will lose all the …
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They expect to sell tickets worth $ 15000 . If it contains an Ace you get your $2 back, plus another $1. What is the (expected) value of the game to you?
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0000025938 00000 n 0000003551 00000 n Figure 8-5: Example expected value.
EV– the expected value 2. 8�:n:0�a��� � �#�� �L�|Kx���cej``ف � 8�v� endstream endobj 110 0 obj 396 endobj 47 0 obj << /Type /Page /MediaBox [ 0 0 612 792 ] /Rotate 0 /Parent 43 0 R /Resources << /ProcSet [ /PDF /Text ] /ExtGState 48 0 R /Font 49 0 R >> /Contents [ 77 0 R 82 0 R 84 0 R 86 0 R 88 0 R 93 0 R 95 0 R 107 0 R ] /CropBox [ 0 0 612 792 ] >> endobj 48 0 obj << /R7 108 0 R >> endobj 49 0 obj << /R21 57 0 R /R19 59 0 R /R17 65 0 R /R15 50 0 R /R13 66 0 R /R11 74 0 R /R9 70 0 R /R25 90 0 R /R23 80 0 R >> endobj 50 0 obj << /BaseFont /UEBEEQ+CMSY7 /FontDescriptor 62 0 R /ToUnicode 52 0 R /Type /Font /FirstChar 0 /LastChar 48 /Widths [ 893 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 329 ] /Encoding 51 0 R /Subtype /Type1 >> endobj 51 0 obj << /Type /Encoding /BaseEncoding /WinAnsiEncoding /Differences [ 0 /minus 48 /prime ] >> endobj 52 0 obj << /Filter /FlateDecode /Length 105 0 R >> stream Suppose the company makes a $ 3 profit on the sale of any working gadget, but suffers a loss of $ 80 for every faulty gadget because they have to …
0000023386 00000 n The expected value or the population mean of a random variable indicates its central or average value. 0000002969 00000 n Therefore, the general formul… 8Q��&��`�ųj4X���*WU5\M| R2���������30��H�F��k�V��V���(�@���� ���s�,T�㙾��%���QP� endstream endobj 53 0 obj << /Type /Encoding /BaseEncoding /WinAnsiEncoding /Differences [ 0 /minus /periodcentered 6 /plusminus 25 /approxequal 40 /arrowdblleft /arrowdblright 50 /element 102 /braceleft /braceright 112 /radical ] >> endobj 54 0 obj << /Type /Encoding /BaseEncoding /WinAnsiEncoding /Differences [ 58 /period /comma ] >> endobj 55 0 obj << /Type /FontDescriptor /FontName /IUYIHC+CMMI10 /FontBBox [ -32 -194 694 694 ] /Flags 4 /Ascent 694 /CapHeight 694 /Descent -194 /ItalicAngle 0 /StemV 104 /MissingWidth 333 /CharSet (/L/comma/period/p/less/greater/u/v/w/a/b) /FontFile3 56 0 R >> endobj 56 0 obj << /Subtype /Type1C /Filter /FlateDecode /Length 99 0 R >> stream 0000003079 00000 n Example of Expected Value (EV) To calculate the EV for a single discrete random variable, you must multiply the value of the variable by the probability of that value occurring.
%PDF-1.3 %���� One out of every 50 gadgets is faulty, but the company doesn't know which ones are faulty until a buyer complains.
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(When In such a scenario, the EV is the probability-weighted averageof all possible events. 0000008863 00000 n 0000006812 00000 n
2 M. Hauskrecht Conditional probability Defin 0000007807 00000 n 0000027519 00000 n