How to get amount to pay in order to be fair

[Cool boi]

If a man purchases a raffle ticket, he can win a first price of $50,000 or a second price of
$20, 000 with probabilities 0.001 and 0.003. What should be a fair price to pay for the ticket?

 

[hlsmith]

< $20K or < $50k. What do you think? Seems like homework, please show your own due diligence and we are happy to help.

 

[Miner]

Fair is in the eye of the beholder. The organization selling the raffle ticket expects to earn a "fair" return for selling the ticket. Market pressures will tend to balance the different expectations onto a price that will be different from either view of a fair price.

 

[Dason]

Fair is in the eye of the beholder.

Nah. In a probability problem fair had a much cleaner definition.

 

[hlsmith]

I would base fair also on the number of tickets sold. If only two tickets are sold and you have a 50% chance of either prize - hmm, what would you pay?

But I guess they are giving us the number of tickets sold based on the probabilities.