We had a year-long cheap buy-in slot tournament that culminated in four finalists shooting for prizes of 10K, 20K, 50K and a million dollars on the final round. They agreed to settle for 60K each even though playing gave them an EV of 270K! The fact that the settlement was slightly better than 2nd prize swamped everything else in their minds. I will leave it to the reader to come up with ways to take advantage of this syndrome.
This is not to say that it is wrong to accept settlements smaller than the “EV”. If the amount is great and the “discount” is small, then of course you should consider it. Even more so if there is a very good chance you will get nothing if you gamble. I would take three million dollars rather than a 5% chance at a hundred million. But that’s a lot different than taking 50K rather than a 25% chance at a million. Obviously, where the cutoff should be, should depend on your bankroll and personal situation. Note that extreme aversion to risk also comes up when people pay far more than the negative EV when they buy insurance, especially when the numbers are small. Can you say, “extended warranty for a vacuum cleaner”?
On the other hand, if you can afford the swings, you might want to get into the business of taking the other side of these settlements.
How are You, you must see those sites property ads and friendship and mobile phones