Question

You are playing on the game show "Deal or No Deal" and there are only 6 cases left (including yours). The possibledoilar amounts left for those cases are $0.01, $75, $5000, $10,000, $400,000 and $1,000,000. The banker offers you adeal of $210000 so you can either accept the deal and take the cash, or keep playing. Find the expected value for yourcase at this point in the game. Should you pick a case or take the banker's offer?

Answer 1

The expected value is the probability times the value for each case

Since picking each case is equally likely, the probability is 1/6

1/6 ( .01) + 1/6 ( 75) + 1/6( 5000) + 1/6 ( 10000) + 1/6 ( 400000) + 1/6 ( 1000000)

235845.835

The expected value is 235845.835

This number is greater than the deal offered to you by the banker, so you should not accept the deal.