Question

Suppose you get 1,000 jollies from $1 million, 1 jolly from $1, and no jollies from zero dollars. Should you play a lottery that costs you $1 and has a probability of winning of 1/1,000,000? Note, unlike most, this is a fair lottery. Expected Payoff = ($1,000,000)(1/1,000,000) = $1

Answer 1

Solution:

Since the expected payoff is equal to the individual investment for each lottery.

In the worst case scenario, the profit made will be equal to the investment made (when the person wins the lottery on 1,000,000th attempt) hence resulting in no value added. This also advocates the scenario by stating that in the worst case as well there will be no loss for the person.

Hence, there is enough evidence for the person to play the lottery which will definitely be given him certain profits and may result in no loss in the worst case scenario making it a win-win situation for him.