Re: Remember the Housing "Bubble"?

On Apr 8, 11:57 am, Bernard Peek <b...@xxxxxxxxxxxxxxxx> wrote:
On 2007-04-08, dwight.thi...@xxxxxxxxx <dwight.thi...@xxxxxxxxx> wrote:





On Apr 8, 8:43 am, Bernard Peek <b...@xxxxxxxxxxxxxxxx> wrote:
On 2007-04-08, dwight.thi...@xxxxxxxxx <dwight.thi...@xxxxxxxxx> wrote:

Look no further than that odious show, 'Deal or No Deal'. I've
explained several times to different audiences how to play the game:
sum the value of all the suitcases and divide by the total number.
That is the expectation value.

That's one estimate. There are others: try discarding the highest and lowest
value boxes until you hve only one or two left. The expectation value is
then the remaining box or somewhere between the two left. Both of our
methods assume a simple relationship between cash value and utility. Which
is why the banker's offer is usually lower than the theoretical value.

Um. Try this example: the expectation value of 4, 8, 16, and 64 is
23. Which is not between 8 and 16.

No, that's the average value.

In this case, they match, since all outcomes are equally probable. To
get the expectation value, you sum the products of an outcome and its
probability. Neeless to say, the probabilities are not necessarily
the same, though they are in my example to match the scenario offered
in 'Deal or No Deal'.

.

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