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The problem with the analysis in the article and with your analysis is that the expected utility of the player is not the same as the expected amount of money.

The problem with the analysis in the article and with your analysis is that the expected utility of the player is not the same as the expected amount of money. Different people have different "utilities of money" reflecting their different risk tolerances, incomes, satiation rates (diminishing marginal utility), etc. The expected value analysis is the correct one if you use the right "value". If you are only playing the game once, then any rational agent should attempt to maximize expected utility. Here "rational" just means that preferences are consistent in a particular way. For the purposes of this game played just once, almost all humans are rational. When humans play multiple times, they quickly lose the ability to calculate and make rational decisions.

danielmarkbruce 4y ago
Exactly. Econ 101 covers expected utility, and it's one of the few pieces of useful econ theory. It's like people write these articles without an elementary understanding of the theory which might be able to sensibly explain the situation.
- ghaff 4y ago
  And expected utility (and decreasing marginal utility of money) does a good job of explaining why most people would change behaviors as you scale the numbers involved even if you keep the ratio of expected values the same.
- Kranar 4y ago
  But the article does go over the utility and explicitly states that for many people the utility of a guaranteed 1 million dollars is greater than a 50/50 chance at 50 million, so I'm not sure what "people" you're talking about or if you even bothered to read the article.
  - withinboredom 4y ago
    “Go big or go home” comes to mind. Most people I know would take the 50/50 chance. In the worst case, nothing in their life changes. If they take the million dollars, something is going to change :) I’m also reminded that “people are happier when a choice is made for them” or some other thing I’ve heard thrown around.
  - danielmarkbruce 4y ago
    The people who write articles like this, call it "why people make dumb decisions", and don't appear to understand this is a well understood area. It's written as though they stumbled across this esoteric idea written by some dude 100 years ago. There is a whole set of papers, Bernoulli is one of the guys who did research on it and there are a bunch more. There is a whole field, the ideas have been pulled together. It's introduced in any half decent microeconomics class. What's next? An article suggesting maybe we can predict how long it will take an apple to hit the ground? That some guy named Newtown penned a few useful ideas on it back in the day? And pretending "physics" isn't a field?

danielmarkbruce 4y ago

Exactly. Econ 101 covers expected utility, and it's one of the few pieces of useful econ theory. It's like people write these articles without an elementary understanding of the theory which might be able to sensibly explain the situation.

ghaff 4y ago
And expected utility (and decreasing marginal utility of money) does a good job of explaining why most people would change behaviors as you scale the numbers involved even if you keep the ratio of expected values the same.
Kranar 4y ago
But the article does go over the utility and explicitly states that for many people the utility of a guaranteed 1 million dollars is greater than a 50/50 chance at 50 million, so I'm not sure what "people" you're talking about or if you even bothered to read the article.
- withinboredom 4y ago
  “Go big or go home” comes to mind. Most people I know would take the 50/50 chance. In the worst case, nothing in their life changes. If they take the million dollars, something is going to change :) I’m also reminded that “people are happier when a choice is made for them” or some other thing I’ve heard thrown around.
- danielmarkbruce 4y ago
  The people who write articles like this, call it "why people make dumb decisions", and don't appear to understand this is a well understood area. It's written as though they stumbled across this esoteric idea written by some dude 100 years ago. There is a whole set of papers, Bernoulli is one of the guys who did research on it and there are a bunch more. There is a whole field, the ideas have been pulled together. It's introduced in any half decent microeconomics class. What's next? An article suggesting maybe we can predict how long it will take an apple to hit the ground? That some guy named Newtown penned a few useful ideas on it back in the day? And pretending "physics" isn't a field?