Loss aversion

[daniel_the_smith]

We flip a coin. If you lose, you pay $100; if you win, you receive $X. How large does X have to be before you would voluntarily take the bet?

Edit: Just one flip.

Please go read my hypothesis after voting: viewtopic.php?p=89772#p89772

I wrote that and then I thought, why not just test it?

[cyclops]

As long as I am convinced that I will receive my win and that the coin is fair I accept any bid above €100.

[hyperpape]

Was the experimental protocol the same as this?

I chose anything above $100, but there's a bit of a fudge factor: I wouldn't take a just barely above even bet today today--we just moved, and money is tight enough that losing $100 would be quite unpleasant. But I'd take it two weeks when my next paycheck comes along.

[Suji]

How many times are we flipping the coin? Once? An infinite amount of times? Some finite amount of times?

[daniel_the_smith]

Just one flip.

[Kirby]

I chose less than $110 because of two reasons:

1.) Anything above $100 gives a positive expected value.
The expected value of the game is:

0.5 * (-100) + 0.5 * (X)

So if I want an expected value > 0, then this needs to be true:

-50 + 0.5x > 0 --> 0.5x > 50 --> x > 100

Expected value can only be really counted on in the limit, of course, which leads me to the second reason.

2.) I am not hurting for money.

Since I am not hurting for money, and since the value of the game is positive for me for over $100, it's a good idea for me to take the bet IMO. Chances are I will profit when X is greater than 100.

I have not read your hypothesis, yet, but in my opinion, the poll needs to take into account the person's financial situation (unless by, "stronger than 10k", you meant that the person has more than $10k ). Some people can easily afford to play a $100 game where they will likely profit, whereas other people don't have that kind of free money to spend.

For example, if the wager was $1 million instead of $100, there's no way that I could afford the bet, so I would not play the game.

So the risk aversion really, really depends on the amount of risk a loss would bring to your situation...

[jts]

See, Kirby, being in slightly less favorable circumstances than yours, I would happily take the million-dollar bet... they'd have no way to collect if I lost!

[Kirby]

See, Kirby, being in slightly less favorable circumstances than yours, I would happily take the million-dollar bet... they'd have no way to collect if I lost!

I don't have a million yet, either. I hadn't considered that. I wonder if filing for bankruptcy is allowed in this game...

[palapiku]

I voted for less than $110 but I'm heavily indoctrinated by poker literature and a math degree.

[Tryss]

I voted for 125-149$.

Anything less than 12.5$ is not worth my time

[illluck]

Seems like there's an issue with finding samples from the below 10k category.

[quantumf]

I think a better way to phrase this bet is that I must bet $100 in order to win $100+x. The mechanics would be that I put $100 into the kitty, and you put $100+x into the kitty, then flip the coin, then the winner takes all.

Statistically, anytime x>0 it's a good bet, but emotionally, its pretty unattractive, particularly coming out of the cold. Perhaps circumstances matter - if I was off to a casino with the aim of doing some gambling, then i would be emotionally ready to lose some money, and the terms of this bet would be fantastic if x>0.

But if you came to my house and offered me this bet, I would need it be big (I chose 180).

[daal]

I would consider taking off your math hats for a moment and rejecting the premise entirely. Why gamble at all? The risk isn't 100$.

Reminds me of a joke:

A repairman comes to a farm to fix a broken power line, and after he's done, he asks the farmer if he can use the toilet. The farmer points him to the outhouse, but warns him that it's a two-seater and says that he has to go too. So the two men go to the outhouse together. While pulling down his pants, a quarter falls out of the farmer's pocket and lands in the latrine. "Darn it!" says the farmer, and pulls out his wallet, takes out a ten dollar bill and tosses it into the latrine. "What the heck did you do that for?" asks the repairman. The farmer looks the repairman in the eye and says. "I darn well ain't going down there for a quarter."

[tapir]

Mathematics misses the point. "We" never flips coins. Usually the person who offers the bet will. When he is willing to offer an obviously bad bet from his perspective, it likely is a fraud. That is what I would expect and I would act on this premise, although it could be a psychologist (studying reactions to surprising offers) or a go player (trying to convince me that I have loss aversion) instead. In fact the more obviously the bet is bad for the person offering it the more convinced I would be of that.

[RBerenguel]

I chose 200. My math degree won't help increase my income... So let's try to at least get more from 100$