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Old 3rd March 2012, 02:29 PM   #13
Ziggurat
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Originally Posted by ynot View Post
I fail to see what this debate has to do with the value of money.
Would you rather get $1 million for sure, or flip a coin and get $2 million if you win, nothing if you lose? The average gain is the same either way. The distribution is not. Many people would pick the former because $2 million isn't twice as useful as $1 million, so the extra risk isn't worth the possible benefit. This is often referred to as marginal value: the million and first dollar is not as valuable as the first dollar. Declining marginal value is typical for most resources.

The original post was ambiguous about what the questioner wanted. It presented alternate scenarios where the average payout was the same (assuming multiple payouts were possible), but like this extreme example, the distributions of payouts was not. If the prize for winning was something with decreasing marginal value, then the value of the winnings would not be equal for the two scenarios, even though the strict average would be.
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