Tunney (2006) was interested in various probability relationships. Specifically, he was interested in how the presentation of probabilities (either as a probability or as a frequency) influenced participant choices. The following is an example of how he presented bets for frequency and probability. Both statements say the same thing for each bet but in different ways.

Based on this table, 

(a) What is the mathematical expectation for winning the Pbet, 

(b) What is the mathematical expectation for winning the £-bet? Based on the mathematical expectation of making P-bets and £-bets, 

(c) If you had to make one bet, which one would you make? Explain.

Transcribed Image Text:

Format Probability Frequency P-bet P= .95 to win £3.50, and p = .05 to lose £1.00 95 tickets in every 100 will win you £3.50, the other 5 tickets will ose you £1.00 C-bet p-40 to win £11.00, and p 60 to lose £2.50 40 tickets in every 100 will win you 11.00, the other 60 tickets will lose you £2.50