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The Favourable Bet Theorem is a statement about the tradeoff between money and risk. It says that a rational agent will prefer some risk over total certainty if the risk offers a chance of getting a higher payoff, but only if the agent is allowed to choose how much money to sink into the risky venture. You might not bet $100,000 even at very good odds (like 10:1), but given the choice, most people would bet at least $1 at those odds.
The current Micro assignment, due Thursday morning, asks us to apply the Favourable Bet Theorem to an actual student health poster about the risky business of having sex while under the influence of alcohol.
I do not know where to go with this one. You can choose a little bit of a bet, but you just can't have a little bit of sex.
Yes, I know House of the Rising Sun is not originally Bob Dylan's, but with a song so frequently covered I reserve the right to reference whichever version I want to.
3 comments:
I don't know about that. There is plenty of fun to be had that isn't very risky.
I guess the big danger with drinking is decreased rationality. Well, that and becoming incapable anyway.
its the class "googler" favourable bet theorem isn't an easily researched topic. how is your assignment coming along?
Why, hello to the first of my classmates to discover this blog. Now I'll have to stop writing about you lot :-P
Googling "favourable bet theorem", indeed, is a pretty unhelpful thing to do. But if instead you Google "favorable bet theorem" you get a lot more hits!
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