[EM] RE : Re: Range voting, zero-info strategy simulation (raphfrk)

[raphfrk at netscape.net]

 > From: abd at lomaxdesign.com
 > At 11:28 AM 11/1/2006, raphfrk at netscape.net wrote:
 > >51% chance of getting $200
 > >100% chance of getting $100
 >
 > That depends on unstated conditions. However, the second choice must be consid
 ered the baseline, since it is 100%. It is as if we start with $100. Shall we be
 t it with an expected average return of $102?
 >
 > How often can we place this bet? How deep are our pockets? How much can we aff
 ord to lose?
 
 There is 1 election every 4 years :).
 
 Though, the value is probably more than $100.
 
 Anyway, I was talking about risk aversion.
 In that case, the bet would be a once off yes/no thing.
 
 People do value a known outcome over an outcome that has risk,
 even if the risk gives higher expected value.
 
 This is why insurance companies exist. People pay say 1%
 of the value of a thing in order to insure against a risk
 that is say 1 in 200 of happening. The expected benefit of
 the insurance is less than the cost, but it is still worth
 getting.
 
 > If we make this bet a thousand times a day, it is highly likely that we are go
 ing to make a daily profit somewhere in the range of $2,000 per day.
 
 Right, the more times you make the bet the
 less effective risk. This is how stock portfolios
 work.
 
 > If losing $100 would be more than mildly painful, or the average cost of placi
 ng the bet would be significant, I'd do this as often as I could, except see bel
 ow.
 >
 
 Correct, if the loss is minimal, then most people are
 risk neutral, you might as well follow the expected
 outcome.
 
 > This is with a constant bet. Doubling the bet each time is practically suicide
 .
 
 Right. The optimal is to increase the bet as you get more
 money. In the 5% gain example, it works out at around 2.5%
 of what you have to risk. Anymore and the chances of
 going bankrupt are alot higher.
 
 > Now, would I actually do it? Probably not. In real life, most of the only situ
 ations which have such accurately determined, predictable rates of return are ar
 tificially created. Gambling. And I *am* a Muslim, and gambling is forbidden. In
 vestment, taking risk, is not.
 
 True, but you can still have an estimate, but not
 with mathematical precision. However, it does
 result in general recommendations like spreading 
 out your risk over multiple stocks.
 
 > I have a friend whose family was putting a *lot* of money into oil leases and
 wildcat drilling in a place they suspected had oil. High risk. But *extremely* h
 igh return if they struck oil. I assume that this has not yet panned out (this w
 as ten years ago), because it would have been very big news. It would have elimi
 nated the dependence of the U.S. on foreign oil for a time. A Muslim, by the way
 .
 >
 
 In practice alot of people who do that lose alot
 (by definition), however, those that don't make 
 loads. A more reasonable thing to do is to
 is to put a percentage of your money into alot
 of different high risk ventures rather than just
 1. This works the same as making lots of bets.
 
 In any case, on the topic at hand. I think that
 there would be people in an election who wouldn't
 vote perfect strategic because they are afraid that
 their least favorite will win. 
    Raphfrk
 --------------------
 Interesting site
 "what if anyone could modify the laws"
 
 www.wikocracy.com    
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