Suppose that the point spread for a particular sporting event is 1

sagnuhh

sagnuhh

Answered question

2021-10-06

Suppose that
the point spread for a particular sporting event
is 10 points and that
with this spread you are convinced you would have
a 0.60 probability of
winning a bet on your team. However, the local bookie will
accept only a
$1000 bet. Assuming that such bets are legal, would you bet
on your team? (disregard any commission charged by the bookie.)
Remember that
you must pay losses out of your pocket. Your payoff table is
as follows:
Bet $1000, -1000
Dont

Answer & Explanation

toroztatG

toroztatG

Skilled2021-10-07Added 98 answers

Disclaimer: Because there are numerous components to the question, only the first two will be addressed.
The provided issue calls for decision analysis expertise.
Here, we must make a choice under risky circumstances, meaning that we are aware of one or more natural situations and have access to adequate data to calculate the corresponding probability.The provided issue calls for decision analysis expertise.
Here, we must make a choice under risky circumstances, meaning that we are aware of one or more natural situations and have access to adequate data to calculate the corresponding probability.
(a) When probabilistic information about the natural world's states is available, we employ the expected value (EV) strategy.
The total of the choice alternative's weighted payoffs represents the decision alternative's expected value.
Decision Alternative D's Expected Value (EV) is described as follows:
EV(dj)=j=1NP(Sj)Oij
where :N=the number of states of nature
P(Sj)= the probability of states of natere Sj
Oij= the payoff corresponding to decision alternative Dj and state of Sj
Pay-off materix
KDecision/State xWin(S1)Loose(S2)
Bet(D1) $1000 $1000
Dont bet (D2) $0 $0
The respective probabilities are:
P11=0.66
P12=0.40
P21=0
P22=0
EV(D1)=1000×0.60+(1000)×0.40=$200
EV(D2)=0
As the expected value of D1 is larger,we would like to bet.
(b) In accordance with the concept of indifference, we should assume equal probabilities and that there is no justification for picking one option over another.
Therefore, 0.50 must be the difference probability for the $0 payment.

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