Expectation and Fair price
A person spins the pointer and is awarded the amount indicated by the pointer.
It costs $8 to play the game. Determine:
· The expectation of a person who plays the game.
· The fair price to play the game.
My work:
E=P(wins)(amount won)+P(loss)(amount lost)
E=1/3(-6)+2/3(-8)
E=1/3*-6/1 + 2/3*-8/1
E=-2/1+-16/3
E=-6/3+-16/3
E=-22/3=7.333
E=$7.33
Fair price=expectation + cost of play
Fair price= 7.33 +8.00
Fair price= $15.33
This just doesn't seem right to me, can someone tell me where I went wrong?
It costs $8 to play the game. Determine:
· The expectation of a person who plays the game.
· The fair price to play the game.
My work:
E=P(wins)(amount won)+P(loss)(amount lost)
E=1/3(-6)+2/3(-8)
E=1/3*-6/1 + 2/3*-8/1
E=-2/1+-16/3
E=-6/3+-16/3
E=-22/3=7.333
E=$7.33
Fair price=expectation + cost of play
Fair price= 7.33 +8.00
Fair price= $15.33
This just doesn't seem right to me, can someone tell me where I went wrong?
