Expected Value and Risk Aversion

Share This Post!
Expected Value isn't as simple as we think

Written by Poker Penguin

Welcome to my second article on economics / game theory.

People value money. Everyone who hasn't taken a vow of poverty would rather have more money than less (Duhh). However, people value risk differently. For example. Let's say you won a magical prize from happyland. Would you rather have $100 or a 50% shot at 200? The Expected Value (EV) is the same, so if you're a good poker player, you would say "it depends".

Actually, good poker players seem to say "it depends" a lot. But anyway. That example isn't very interesting. But what if the choice was between $100 and a 50% shot at S201? Technically, the EV is marginally higher if you take the coin toss. However, many people will give up the 50 cents in order to get a sure $100. They are what we would call risk averse.
The opposite is of course, risk seeking. These people would take a coin toss for $199 over a sure $100. Well, in theory anyway.

Article continued on: Best Poker Offers

Related Articles

Bad Beats
The dreaded bad beat - we've all been there
Seven Deadly Sins of Poker
The seven deadly sins will condemn your bankroll to hell! Read all about it here.
Outs and Board Reading in Omaha
Jim Green discusses how to read hands and outs in Omaha8
The most important decision in Holdem
Game selection is the most important decision in holdem.
Two Poker Truths
The Poker Penguin shares two powerful poker truths, read on for more details...
Red Kings Poker
Online Poker Tournaments -------- Poker games all have regulations and rules and limits that are particular to the type of game that you are playing. If you aren't familiar with these rules and regulations it will make your run for the money much more difficult. One of the most effective things you can do prior to starting is the regulations and strategy tips that you can get at well-known online gambling sites. Then you should try it out at the free tables until you are confident in your ability to play well. Online Poker Tournaments are no exception to this.