06.02_Thinking1

# 06.02_Thinking1 - Do more words Begin with the letter R or...

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© S. J. Luck All rights reserved 2 • The concept of “expected value” (EV) dominates rational decision-making models • Expected value is calculated by multiplying the probability of each possible outcome by the value of that outcome and then summing them all together • Example 1: Coin Toss – Win \$100 for heads, and lose \$100 for tails – EV = .5 x \$100 + .5 x -\$100 = \$0.00 – If you do this an inFnite number of times, you would be
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## This note was uploaded on 11/08/2010 for the course PSC PSC100 taught by Professor Luck during the Spring '10 term at UC Davis.

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06.02_Thinking1 - Do more words Begin with the letter R or...

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