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Lecture 2_Part1

# Lecture 2_Part1 - Characteristics of Probability...

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SUNY at Albany - Department of Economics Eco 320 • Economic Statistics Characteristics of Probability Distributions I Expected Values

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0. Question to be Answered A. If you gamble, you care about how often you will win. The probability of winning tells you what proportion of a large number of bets will be winners. You care even more about how much you will win, because winning a lot is better than winning a little. B. Which is the better gamble: an enormous jackpot with extremely small odds or a modest jackpot with more reasonable odds? C. In another context, which is the better investment: an unusually high return with very small odds or a modest return with moderate odds? SUNY at Albany - Department of Economics Eco 320 • Economic Statistics
00. Lotteries raise public revenue without raising taxes. A. Government-run gambling reappeared in 1964, when New Hampshire caused a furor by introducing a lottery to raise public revenue without raising taxes. B. Forty-two states and all Canadian provinces now sponsor lotteries. C. Some form of legal gambling is allowed in 48 or the 50 states. D. Over half of all adult Americans have gambled legally. They spend more betting than on spectator sports, video games, theme parks, and movie tickets combined. SUNY at Albany - Department of Economics Eco 320 • Economic Statistics

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[Example] The Tri-State Daily Numbers A. The “Straight” from the Pick 3 game of the Tri -State Daily Numbers offered by New Hampshire, Maine, and Vermont: You pay \$0.50 and choose a three-digit number. The state chooses a three-digit winning number at random and pays you \$250 if your number is chosen. What is your probability of winning? SUNY at Albany - Department of Economics Eco 320 • Economic Statistics
A. The “Straight” from the Pick 3 game of the Tri -State Daily Numbers offered by New Hampshire, Maine, and Vermont: You pay \$0.50 and choose a three-digit number. The state chooses a three-digit winning number at random and pays you \$250 if your number is chosen. What is your probability of winning? Because there are 1000 three-digit numbers, you have probability 1/1000 of winning. Here is the probability distribution for your winnings: B. What are your average winnings? SUNY at Albany - Department of Economics

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Lecture 2_Part1 - Characteristics of Probability...

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