Therefore, we get 18 20 P {X > 0} = P {win first bet} + P {lose, win, win} = + · 38 38 18 38 2 ≈ 0.5981. (b) The strategy described above is not a “winning” strategy because if the gambler wins then he or she wins $1. However, a loss would either be $1 or $3. (c) We first note that the random variable X can take on 1, −1 and −3, where “–” denotes that the gambler loses money. Then we obtain P {X = 1} = P {win first bet} + P {lose, win, win} = 18 20 + · 38 38 18 · 38 18 38 20 38 2 2 , , P {X = −1} = P {lose, lose, win} + P {lose, win, lose} = 2 · P {X = −3} = P {lose, lose, lose} = 20 38 3 .
He is choosing certainty over uncertainty, and is risk averse. An individual who purchases a lottery ticket is subjecting himself to a large chance of losing a small amount (£1 for lottery ticket) and a small chance of winning a large amount, rather than keeping his £1 to avoid risk all together (Friedman and Savage. 1948). Any decision under risk can be represented by a choice among lotteries. The general form of a lottery is [(x1,p1),(x2,p2),(x3,p3),…,(xn,pn)] where xi are objects, usually units of wealth that the individual will get if state i occurs, and pi the probability that state i occurs.
Permutation probability is where the order does matter. Once you have learned how to tell the difference, you can now solve probability problems. One example, probability is useful in everyday life is being visible through the lottery. The lottery deals with probability because you may never know if you have a winning number or a losing number. If you improve your knowledge on probability, you may up ending up having a new future of riches.
Gambling addiction, also known as compulsive gambling, has become a big issue in today’s society. It can vary from making a simple bet of a dollar with a friend to going to the casinos and putting hundreds to thousands of dollars into the machines to play “games”. While most people are at it for fun, there are people that do it because they think they need to (problem gambling). These people will do anything they can in order to gamble, which can lead to negative consequences for him/herself and the community. As of now, there are only two states that do not allow any type of gambling.
Winning the lottery not only changes the winner, but it also changes everyone close to the winner. Usually when someone wins the lottery, mysterious and feuding family members will start calling. People calling themselves to be related to the winner somehow will show up at the door and start asking if the winner can help them out financially. As stated above, winning the lottery can change behavior and then that causes resentment from loved ones as they see the change for the worse. Money does funny things to people and people that are with originally low income has the most trouble with large sums of
“Assess whether price discrimination is always undesirable” (25 marks) Price discrimination is the act of charging different consumers different prices for the same product, for reasons no associated with cost. First degree discrimination occurs when consumers pay the maximum price that they were willing and able to pay, second degree involves charging a different price for different quantities demanded and third degree occurs when charging different prices to different consumer groups. This statement suggests that price discrimination is always undesirable, however, although there are disadvantages to price discrimination, there are also some advantages that can be derived and therefore although price discrimination is undesirable to an extent, it is not always undesirable. A predominant reason why price discrimination is undesirable is because it can significantly reduce, or in extreme circumstances eliminate, consumer surplus, which in turn signifies a loss of welfare. This occurs with first degree price discrimination as consumers must pay the maximum that they were willing/able to pay, which may lower their real income.
Weiss opens up his article with, “As a reformed online gaming thief, this ruling makes no sense to me. It places too much value on the time people spend playing video games. Video games are not work or investments for which people should be compensated; they are escapism.” (Alex Weiss) Some may say that time is money, but that may not be the case. The productivity in the game is what makes each individuals’ time valuable. Therefore compensation for piracy of an object that does not exist would place the value of the time spent to gain a merely hypothetical item.
Towards the end of the process, the contestant is able to switch the item chosen or keep it. If the contestant does not switch, he/she has a 1/3 chance of getting the grand prize. There is a 1/3 probability because if the contestant does not swap, they will keep their original prize, meaning that the other two prizes are irrelevant. On the other hand, if the contestant does switch, he/she has a 2/3 chance of getting the grand prize. There is a 2/3 probability because when the contestant chooses a prize and does switch, the contestant has twice the more chance of getting the prize because of the swap.
In effect, efficient markets depend on market participants who believe the market is inefficient and trade securities in an attempt to outperform the market. The main premise of efficient market hypothesis is that prices of securities always reflect all available information about them. The consequence of the market efficiency is that prices of the assets are rational and that they are unpredictable. If the assets are mispriced, rational traders will arbitrage away any deviation from its fundamental value. According to Eugene F.Fama, Random Walks in stock.
He mentioned traders not being able to hold on to their goods so they were able to negotiate better prices. Instead, they had to take whatever little money they could get because of their need to survive. This then would result in the wealthy traders having the upper hand and controlling the markets (162). A contemporary example of this would be my EBay business. I purchase coveted limited-edition items and post my listings until the other EBay sellers have ran out of stock.