You and a rival are engaged in a game in which there are three possible outcomes: you win, your rival wins (you lose), or the two of you tie. You get a payoff of 50 if you win, a payoff of 20 if you tie, and a payoff of 0 if you lose. What is your expected payoff in each of the following situations? (a) There is a 50% chance that the game ends in a tie, but only a 10% chance that you win. (There is thus a 40% chance that you lose.) (b) There is a 50–50 chance that you win or lose. There are no ties.
You and a rival are engaged in a game in which there are three possible outcomes: you win, your rival wins (you lose), or the two of you tie. You get a payoff of 50 if you win, a payoff of 20 if you tie, and a payoff of 0 if you lose. What is your expected payoff in each of the following situations? (a) There is a 50% chance that the game ends in a tie, but only a 10% chance that you win. (There is thus a 40% chance that you lose.) (b) There is a 50–50 chance that you win or lose. There are no ties.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
You and a rival are engaged in a game in which there are three possible
outcomes: you win, your rival wins (you lose), or the two of you tie. You
get a payoff of 50 if you win, a payoff of 20 if you tie, and a payoff of 0 if
you lose. What is your expected payoff in each of the following situations?
(a) There is a 50% chance that the game ends in a tie, but only a 10%
chance that you win. (There is thus a 40% chance that you lose.)
(b) There is a 50–50 chance that you win or lose. There are no ties.
(c) There is an 80% chance that you lose, a 10% chance that you win,
and a 10% chance that you tie.
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