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December 20, 2014

December 20, 2014

Posted by **Diane** on Sunday, November 2, 2008 at 3:32pm.

- Math -
**economyst**, Monday, November 3, 2008 at 10:08amAh, a variation on the good old St Petersburg paradox.

Prob of winning $1 is .5

Prob of winning $2 is .5*.5

Prob of winning $4 is .5*.5*.5

Prob of winning $8 is .5*.5*.5*.5

and so on,

Expected value is sum over all possible outcomes, the probability times the value of the prize.

E = .5*1 + .25*2 + .125*4 + ...

= .5 + .5 + .5

The expected value from each flip is $0.5 So, after 10 flips, the expected value is 5. (after 100 it would be 50)

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