Expected Value and Risk Aversion

Share This Post!
Expected Value isn't as simple as we think

Written by Poker Penguin

penguin2.txt
Welcome to my second article on economics / game theory.

People value money. Everyone who hasn't taken a vow of poverty would rather have more money than less (Duhh). However, people value risk differently. For example. Let's say you won a magical prize from happyland. Would you rather have $100 or a 50% shot at 200? The Expected Value (EV) is the same, so if you're a good poker player, you would say "it depends".

Actually, good poker players seem to say "it depends" a lot. But anyway. That example isn't very interesting. But what if the choice was between $100 and a 50% shot at S201? Technically, the EV is marginally higher if you take the coin toss. However, many people will give up the 50 cents in order to get a sure $100. They are what we would call risk averse.
The opposite is of course, risk seeking. These people would take a coin toss for $199 over a sure $100. Well, in theory anyway.


Article continued on: Best Poker Offers


Related Articles

Bad Beats
The dreaded bad beat - we've all been there
badbeat
Seven Deadly Sins of Poker
The seven deadly sins will condemn your bankroll to hell! Read all about it here.
twentsins
Outs and Board Reading in Omaha
Jim Green discusses how to read hands and outs in Omaha8
o8board
The most important decision in Holdem
Game selection is the most important decision in holdem.
game
Two Poker Truths
The Poker Penguin shares two powerful poker truths, read on for more details...
twotruths
Poker games all have rules and limits that are peculiar to the type of game that you are playing. If you aren't experienced with these regulations and rules it will make your challenge for the money much more difficult. One of the best things you can do prior to starting is peruse the rules and regulations and strategy hints that you can get at well-respected online gambling websites. Then you should practice at the free tables until you are confident in your ability to hold your own. Best Online Poker Site is no exception to this in that we offer the best chance to learn at many free sites.