At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?

A) $30
B) $40
C) $50
D) $80

Question

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?A) ​$30B) $40C) $50D) ​$80

Student: Abed Yassine · Accepted Answer

Final Answer : B, Explanation :  To maximize the profit, the game owner needs to charge an amount that is higher than the expected value of the winning. The expected value of the winning is:10/3 + 30/3 + 80/3 = $40Therefore, the game owner should charge an amount higher than $40, which eliminates options A and D. Option C is too high and would likely deter rational players from playing the game altogether. Therefore, option B, which is slightly higher than the expected value of the winnings, would be the best choice for the game owner to maximize their profit.

At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?

A) $30
B) $40
C) $50
D) $80

Definitions

Learning Objectives

Learning Objectives

Related questions

​At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?A) ​$30B) $40C) $50D) ​$80

Definitions

Learning Objectives

Learning Objectives

Related questions

At a fair carnival roulette wheel,a player can either win $10,$30,or $80.Assuming a rational player,how much should the game owner charge the player,to maximize his own profit?

A) $30
B) $40
C) $50
D) $80