Matched 5/7 on the Lottery today... :D

[devonin]

And yet, according to your numbers, while they do converge at 1500 with enough iterations, 1A and 2B -are- marginally superior choices given the number of iterations you ran :P

[rushyrulz]

^

These scenarios seem like a one-time offer, in which I would take 1B and 2B.

[DotKritic]

I would go to a casino, but the nearest one is 2 hours away in Louisiana.

[rushyrulz]

[PaperclipGames]

Originally Posted by Reincarnate

IMO expected value/utility is a super interesting concept.

SCENARIO 1

You have $1000. What do you choose:

Option A: 50% chance of earning another $1000, 50% chance of earning $0
Option B: 100% chance of earning another $500


SCENARIO 2

You have $2000 this time. What do you choose:

Option A: 50% chance of losing $1000, 50% chance of losing $0.
Option B: 100% chance of losing $500


Choose what "feels right" to you, then crunch the math and wonder wtf is wrong with your brain

The expectation values of all four scenarios are the same, but there are still differences. 1A and 2A are literally the same, as are 1B and 2B. However, the variance of xA is greater than zero, whereas the variance of xB is zero. That is to say, the "swings" to loss/profit relative to the expactation value ($1500) is smaller in option B than in option A. So (of course, depending on the mood of the player), one may legitimately feel "safer" to pick option B.

[Reincarnate]

Originally Posted by devonin

And yet, according to your numbers, while they do converge at 1500 with enough iterations, 1A and 2B -are- marginally superior choices given the number of iterations you ran :P

That's just where those numbers happened to be after 1000000 trials on this particular run. They can just as easily be under the threshold, too. They're no more or less "superior" or "inferior" -- they fluctuate up and down over time and hone in on 1500 with more iterations (and the direction of the fluctuations are equally probable with each iteration).

The point is that the expected values are the same, but the risks are different. All four choices are exactly equivalent to a risk-neutral investor.

[Zapmeister]

there was this guy who once brute forced the lottery in ireland by buying almost every single combination of numbers. it took 28 people 6 months to actually fill in all the tickets. they profited around £300k

http://en.wikipedia.org/wiki/Nationa...story_of_Lotto
http://www.independent.co.uk/news/ho...y-1322272.html

[ssbmchamp]

Originally Posted by Wayward Vagabond

winning the lottery is my financial plan. so far ive spent 24k over the course of 5 years and when i win it will be a small price to pay considering the money that i will be winning

Are you being serious? You must make decent money to be able to do that. If I did that my bills would probably not be paid on time....or at all.

[rushyrulz]

I believe that to be a sarcastic quip.

[reuben_tate]

The expectation values could become positive if you factor in how much people value the "excitement" and "enjoyability" of playing.

[Reincarnate]

Originally Posted by reuben_tate

The expectation values could become positive if you factor in how much people value the "excitement" and "enjoyability" of playing.

Be careful with this kind of reasoning though -- don't forget opportunity cost.

If you're poor, for example, then yeah, maybe lotto tickets make you happy. But if you had instead put that money towards getting out of poverty, you'd be able to achieve even more happiness.

[reuben_tate]

Originally Posted by Reincarnate

Be careful with this kind of reasoning though -- don't forget opportunity cost.

If you're poor, for example, then yeah, maybe lotto tickets make you happy. But if you had instead put that money towards getting out of poverty, you'd be able to achieve even more happiness.

That is most definitely true. I was just trying to perhaps fish for some justification for why people would buy lottery tickets. Perhaps for some people, buying lottery tickets just makes them so unimaginably happy that nothing else in the world can compare to it.

Perhaps kjwkjw and eze are right...perhaps I do just argue for the sake of arguing sometimes...
I personally have never bought a lottery ticket (mostly because of legal issues but also because of how illogical it is) and I never plan to ever buy one either.

[reuben_tate]

Originally Posted by ilikexd

how is it worth buying at least one if every one has a negative expected value?



each lottery ticket has an independent outcome so that's not a valid strategy

There is actually good reasoning for why someone would just buy just one (or a few). Although each lottery ticket has an independent outcome, when you buy them, the marginal utility (the happiness/enjoyment of participating in the lottery) of each ticket changes. More precisely, according to the law of diminishing marginal utility, as the number of tickets you buy approaches infinity, the marginal utility of each one approaches zero. So theoretically, a person of sound mind should buy a lottery ticket and keep buying lottery tickets until the marginal utility of buying them just isn't worth it anymore.

It just so happens for most people of sound mind that the value of the enjoyment of participating in the lottery is so small and insignificant that it would be in their best interest to buy zero lottery tickets.

PS When I say marginal utility and other terms, I mean after opportunity costs have been taken into account.

[Reincarnate]

Originally Posted by ilikexd

how is it worth buying at least one if every one has a negative expected value?

It's almost never worth it from an economic standpoint, but money and utility do not have a 1:1 relationship.

One of my friends is the daughter of an extremely wealthy businesswoman. My friend also went to a good school and did ibanking for a few years, and now helps out with the business. She could retire at age 30 if she wanted to without breaking a sweat.

Even so, every day she buys a lottery ticket. She knows full well that she won't ever win. But to her, that dollar she spends on the ticket is meaningless. She won't miss it at all -- and in return, she gets utility (happiness) from playing and having the "chance" of winning some huge pot.

In other words, that dollar is worth so little to her that she's basically playing the lottery for free and it makes her happy, so why not? The utility of the lost dollar is more than compensated for by the utility of playing the game.

This is much different for someone who is in poverty and spends $600/year on lottery tickets. That's money they *will* miss. It's massive opportunity cost for them. They may feel happy, too, by playing -- but in this case the economic effect is much larger (relatively speaking) to the point where the foregone utility is huge.

[ilikexd]

if the argument is that it's worth buying for utility (happiness), then the question becomes why would one get happiness from buying a lottery ticket

you could of course say excitement or thrill, but if you have a strong conceptualization of extremely low probabilities then you won't be getting any thrill; in other words the lottery should only make you happy if you're uneducated

thread has been mega-derailed whoops

[Reincarnate]

Originally Posted by ilikexd

if the argument is that it's worth buying for utility (happiness), then the question becomes why would one get happiness from buying a lottery ticket

you could of course say excitement or thrill, but if you have a strong conceptualization of extremely low probabilities then you won't be getting any thrill; in other words the lottery should only make you happy if you're uneducated

thread has been mega-derailed whoops

Everyone's utility profile is different. What I find fun or worthwhile may be useless to you, etc.

My friend, for example, just thinks it's fun to compare the numbers / scratch and unveil the prizes, etc. The "suspense" of it all is exciting to her.

Personally, I'm in your boat. Even if the lottery were free, I wouldn't bother wasting the time going into the store / buying the ticket / checking the numbers / whatever. As far as I'm concerned, the whole thing is an exercise in futility and I'd have more fun doing something else with my time. I also agree that a lot of people severely underestimate just how unlikely a win is.

[Wayward Vagabond]

Originally Posted by rushyrulz

I believe that to be a sarcastic quip.

n.n