Question

Assume you have a ticket that will let you participate in a game of chance (a lottery) that will pay off $10 with a 45% chance (or a 55% chance of getting nothing). Your friend has a ticket to a different lottery that has a 20% chance of paying $25 (or an 80% chance of paying nothing). Your friend has offered to let you have his ticket if you will give him your ticket plus one dollar.

Required:
Build an influence diagram for this problem.

Answer 1

I have a lottery ticket that will pay off $ 10 with a 45% chance and a friend of mine has a chance of 20% by paying off $ 25.

It is based on Double risk dilemma.

Individual --- trade ticket (-1) ----24 (win(25) (0.20))

----- -1 (lose ) (0.80)

----- keep trade -------10 (win 10) (0.45)

----- 0 (lose) (0.55)

Next, solve the decision tree using expected monetary value.

EVM (keep ticket) = 0.45 (10) + 0.55 (0) = $ 4.50

EVM (trade ticket) = 0.20 (24) + 0.80 (-1) = $ 4

Therefore, we keep the ticket and do not trade.