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Lumifer comments on Open Thread for February 11 - 17 - Less Wrong Discussion
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I participated in an economics experiment a few days ago, and one of the tasks was as follows. Choose one of the following gambles where each outcome has 50% probability Option 1: $4 definitely Option 2: $6 or $3 Option 3: $8 or $2 Option 4: $10 or $1 Option 5: $12 or $0
I choose option 5 as it has the highest expected value. Asymptotically this is the best option but for a single trial, is it still the best option?
That depends on your utility function, specifically your risk tolerance. If you're risk-neutral, option 5 has the highest value, otherwise it depends.