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(+) You are a contestant on a television game show and you have won $5000 so far. You are now offered a choice: either you can keep the money and leave or you can continue into the next round, where you have a 70% chance of increasing your winnings to $10000 and a 30% chance of losing the $5000 and finishing the game with nothing. (a) Which option would you choose? (b) How does your choice compare with that which would be prescribed by the expected monetary value criterion? b) As the decision tree below shows, according to the EMV criterion you should continue to the next round because your expected winnings, at $7000, are higher than your current winnings of $5000 Keep the money Lose 0.7 0.3 Winnings (3) 5000 10 000 0

(+) You are a contestant on a television game show and you have won $5000 so far. You are now offered a choice: either you can keep the money and leave or you can continue into the next round, where you have a 70% chance of increasing your winnings to $10000 and a 30% chance of losing the $5000 and finishing the game with nothing. (a) Which option would you choose? (b) How does your choice compare with that which would be prescribed by the expected monetary value criterion? b) As the decision tree below shows, according to the EMV criterion you should continue to the next round because your expected winnings, at $7000, are higher than your current winnings of $5000 Keep the money Lose 0.7 0.3 Winnings (3) 5000 10 000 0

A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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(4) You are a contestant on a television game show and you have won $5000 so far. You are now offered a choice: either you can keep the money and leave or you can continue into the next round. where you have a 70% chance of increasing your winnings to $10000 and a 30% chance of losing the $5000 and finishing the game with nothing. (a) Which option would you choose? (b) How does your choice compare with that which would be prescribed by the expected monetary value criterion? b) As the decision tree below shows, according to the EMV criterion you should continue to the next round because your expected winnings, at $7000, are higher than your current winnings of $5000. Winnings (3) 5000 Keep the money Continue to ned 70001 0.7 Increase winnings Lose 0.3 10 000 0
Transcribed Image Text:(4) You are a contestant on a television game show and you have won $5000 so far. You are now offered a choice: either you can keep the money and leave or you can continue into the next round. where you have a 70% chance of increasing your winnings to $10000 and a 30% chance of losing the $5000 and finishing the game with nothing. (a) Which option would you choose? (b) How does your choice compare with that which would be prescribed by the expected monetary value criterion? b) As the decision tree below shows, according to the EMV criterion you should continue to the next round because your expected winnings, at $7000, are higher than your current winnings of $5000. Winnings (3) 5000 Keep the money Continue to ned 70001 0.7 Increase winnings Lose 0.3 10 000 0
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