APFIVE Expected Value of a Lottery Ticket
An experiment: A charity lottery sells $$10,000$$ tickets at $$1$$ each with one prize, resulting in a net payoff of $$7499$$ for the winner and $$-1$$ for non-winners. What would happen if the prize were doubled to $$15000$$, in terms of the expected value for each ticket holder?
TABLE: Lottery Outcomes
| Outcome | Net Payoff | Probability |
|---|---|---|
| Win | $$7499$$ | 1/10000 |
| Lose | $$-1$$ | 9999/10000 |
A
The expected value becomes exactly $$+7.4999$$ per ticket.
B
The expected value remains a $$0.25$$ loss per ticket.
C
The expected value becomes $$+7.50$$ per ticket.
D
The expected value becomes approximately $$+0.50$$ per ticket.
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