Change Variables and Find The Breakeven Expected Value Point Thus on average, we would have lost $150 which is $1.5 per day. So if we did this 100 days in a row, 90 of the days we would have saved $5 each day for $450, but we would have been fined 10 times for $600 total.

The $1.5 comes from is the average loss we will make over a long period of time. This may confuse people as in no single case can we lose $1.5 – we either save $5 or we have to pay $60. So on average, every time we don't pay our parking ticket we will stand to lose $1.5. Expected Value FormulaĮxpected value, EV = (probability of gain)*(value of gain) + (probability of loss)*(value of loss)įor our parking ticket example this becomes:ĮV = (0.90)*($5) + (0.10)*(-$60) = $4.5 – $6 = -$1.5 The wording may be quite confusing but the expected value formula will make more sense.

Potential loss = -$60, Probability of that loss = 10% Potential gain = $5, Probability of that gain = 100%-10% = 90%. We have all this information from the real life example above: Then we must find the product of the potential loss and the probability that the loss will occur and minus this value from the first part. To work out our expected value we multiply the potential gain by the probability of that gain occurring (for example saving $5 by not paying the parking ticket by 90%). For people who aren't too keen on math, don't worry, it's pretty simple. We can find the expected value by using a simple equation. To solve this problem we can use expected value. Or take the chance that we will not be caught? The fine for not having a parking ticket is $60. We estimate that the probability that we will be caught without a ticket is 10%. To take a real world example – we park our car in a city and unfortunately it costs is $5 an hour. If we are the player making the bet, the expected value will be based on our pot equity, bet size and fold equity.

opponents bet size) when we face a bet and is based on our equity, our betsize and our oppoents fold frequency when we bet or raise. The expected value will be based on our current pot equity and pot odds (i.e. The definition of expected value is the average returns we would expect from taking a particular action (.i.e betting/raising/calling). A Quick Trick To Determine Profitability When Calling.Change Variables and Find The Breakeven Expected Value Point.

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