I was watching Deal or No Deal on CNBC last night and, being the numbers guy that I am, couldn’t help but think about optimal strategies and risk-reward evaluations. I thought about writing something down to enlighten the masses, but it seems someone has already spelled out the basis for an optimal strategy:

Optimal Strategy – When to Deal at WikiPedia.

Is there an investment lesson in here somewhere? It does remind me of the tradeoff one makes choosing to play the stock market rather than invest through fixed-return vehicles.
– How much risk are you willing to take for how much of a payoff?
– How much additional stress are you taking on to earn how much more percentage points per year?
– On average, you’ll take a bigger return investing in stocks. But you only get one chance, and what will your wife or husband think when you lose 30% of your net worth in one day?
– Would you refuse a $76,000 deal and face a 25% chance of going home with less than $100 for a $75% chance of earning an additional $25,000?

Comments (4)

I love Wikipedia. Have you tried out Answers.com? It offers a similar kind of satisfaction, depending on what you seek.

Regarding the posting, great topic! I’m always yelling at people to take the deal or to go on. My own personal take is that the $$$ has to go over $100k before deals should be considered. This, of course, completely depends on the early decisions and outcomes, but my rule of “$100k or less deal” seems to work pretty damn well. From there, well, it is all discussed on Wikipedia. 😉

John, I actually never saw answers.com. Nice site.

Ooglaser, I realize you may be having language trouble, but what do you mean by “won’t get a deal with them”? I hate seeing that sad face icon at the bottom of your comment.

🙂

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