Joaquin’s Problem

Joaquin has 2 job offers.  Offer 1 is worth $1150, and is guaranteed.  Offer 2 comes with $2100, but is not guaranteed.  The producer claims its likelihood at 95%, but Joaquin’s estimate puts it at only 70%. Which job should Joaquin take?

Let’s find the break even point:

100% chance of 1150 = a x% chance of 2100

(1*1150) = (2100x)/100

115000=2100x

x=115000/2100

x= 54.7619048

So if Offer 2 has a probability of 55% or greater, it’s the better bet.

This advantage is even higher if you believe the producer behind Offer 2’s estimate, or if we allow for Offer 1’s producer to be less than completely trustworthy.

I wish I could break all of my decisions down to mathematics.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: