HW 7: Calculate the Expected Monetary Value (EMV) for the following scenario
Imagine that you are asked to play the following game with 5 of your friends*. Everyone is given a number from 1 to 6, and each person puts in $10. The die is rolled and the lucky person that matches the number that comes up on the dice, gets to keep all the money ($60).
Formula: EMV = P(O1)*M(O1) + P(O2)*M(O2)+ . . . + P(On)*M(On)
•What is the Expected Monetary Value (EMV) calculation for this game?
•Is it a good idea to participate in this game?
•Under what circumstances would it, or would it not be, a good idea to participate?
* Other than the obvious relationship to running a casino, the scenario is also similar to marketing scenarios in terms of calculating the expected monetary value associated with customer relationship management, loyalty programs, etc; that have their associated outcomes and probabilities of outcomes.