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shminux comments on How much to spend on a high-variance option? - Less Wrong Discussion

9 Post author: RolfAndreassen 03 January 2013 06:38PM

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Tags: lottery variance

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Comment author: shminux 03 January 2013 07:23:51PM 9 points [-]

Is there any sensible way of deciding how much to put into an option that has a positive expected value, but very low chance of payoff?

People here have been known to buy life insurance and sign it over to an enterprise promising just that.

Comment author: RolfAndreassen 03 January 2013 09:35:57PM 3 points [-]

Yes, but in that case you get a single take-it-or-leave-it offer. With a lottery you can buy up to the limits of your current cash reserves.

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