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
Red Kings Poker
Finding the best poker sites of 2014 isn't an easy task. We will show you how to find the best site, by giving you an updated top list and comparing them.Poker games all have regulations and rules and limits that are particular to the type of game that you are playing. If you are not experienced with these regulations it will make your challenge to get the the money that much harder. The most effective thing you can do before you start is the rules and regulations and strategy tips that you can get at well-known online gambling websites. Then you should practice your playing at the free tables until you are confident in your ability. Best Poker is no exception to this.