How to get amount to pay in order to be fair

#1
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

Not a robit
#2
< $20K or < $50k. What do you think? Seems like homework, please show your own due diligence and we are happy to help.
 

Miner

TS Contributor
#3
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.
 

hlsmith

Not a robit
#5
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.
 
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