Question

You are a contestant on a game show called “Bargain or No Bargain.” You are presented with three briefcases, which contain rewards of $500,000, $2,000, and $500. The host of the show says you can either open one random case and keep the amount inside, or you can accept a guaranteed award of $160,000. What is the mathematically correct decision, and why
A. Take the $160,000, because it is greater than the expected value of the briefcases.
B. Choose a briefcase, because the expected value is greater than $160,000.
C. Choose a briefcase ,because the expected value is less than $160,00

Answer 1

Based on the given values of briefcases presented, there is only a little chance that you would get the briefcase with the $500,000 considering that there are three. Therefore, the mathematically correct decision for this and why would be option A. Take the $160,000, because it is greater than the expected value of the briefcases. Hope this answer helps.