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(10) Consider a lottery, L(30, 210;13,23). Show that this lottery can be interpreted as a fair...

  1. (10) Consider a lottery, L(30, 210;13,23). Show that this lottery can be interpreted as a fair gamble from the initial wealth of the EV (expected value) of this lottery.
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Answer #1

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Tthe above lottery shows,

The probability of getting lottery amount 30 is 1/3

The probability of getting lottery amount 210 is 2/3

As a fair gamble, the initial wealth of the EV (expected value) of this lottery.

Expected value (EV) = (Probability1*outcome1)+ (Probability2*outcome2)

EV = 210*2/3 + 30*1/3 = 140 + 10 = 150

Hence, a fair gamble from the initial wealth of the EV (expected value) of this lottery is 150.

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