Certainty Equivalent: Two FSU Bets
Florida State has two upcoming games with very different odds. For each one, you’ll tell us the smallest guaranteed dollar amount you’d take instead of a bet on the game — the amount that makes you exactly indifferent between the guarantee and the bet.
Game 1: FSU vs. Central Arkansas
A statistician estimates FSU has about a 99% chance of winning. Picture that as 100 equally likely alternate versions of this week's game — in about 99 of them, FSU wins; in about 1, Central Arkansas wins.
Consider a bet: you get $8 if FSU wins, $0 if Central Arkansas wins. What guaranteed amount makes you indifferent between that amount for sure, or the bet?
Game 2: FSU at Louisville
A statistician estimates FSU has about a 68% chance of winning. In about 68 of 100 equally likely alternate versions of this game, FSU wins; in about 32, Louisville wins.
Same kind of bet: you get $8 if FSU wins, $0 if Louisville wins. What guaranteed amount makes you indifferent between that amount for sure, or the bet?
Thanks, — your amounts have been recorded!
Screen name:
Central Arkansas amount:
Louisville amount: