Expected value, Microeconomics

Expected Value

- The weighted average of payoffs or values resulting from all the possible outcomes.

  • The probabilities of every outcome are used as weights
  • Expected value measures central tendency; payoff or value expected on an average

- An Example

  • Investment in drilling exploration:
  • The outcomes that are possible is two

-  Success -- stock price increase from $30 to $40/share

-  Failure -- stock price decrease from $30 to $20/share 

Posted Date: 10/10/2012 8:17:20 AM | Location : United States







Related Discussions:- Expected value, Assignment Help, Ask Question on Expected value, Get Answer, Expert's Help, Expected value Discussions

Write discussion on Expected value
Your posts are moderated
Related Questions
Learning Curve in Practice * Scenario - A new firm enters chemical processing industry. * Do they: 1) Produce a low level output and sell at high price? 2) Produce


Conventions as a Basis for Forming Expectations : Since there is little objective basis for probability distributions about future yields, decision-makers have to act on the ba

Why demand curve is always negative and write its effects.

Why Have These Economies Converged? By and large economies which have converged are those which belong to OECD: the Organization for Economic Cooperation and Development that w

Given the following demand and total cost functions for a firm P = 4500 - 0.5Q 2                     TC = 1.5Q 3 - 50Q 2 + 1000   i) the marginal profit function

The End of the Malthusian Age We clearly no longer live in a Malthusian age. For at least 200 years improvements in the efficiency of labor made possible by new technologies a

Rationale in era of globalisation: In the present era of globalisation where countries have unprecedented access to international capital flows and where those who have borrow

Will Governments Follow Good Policies? That governments can assist in development and growth doesn't mean that governments will. The broad experience of growth in developing ec