Improper measurements. You can’t compare a time-based number (annual income) to a one-time decision (lump sum of $0, $20 or $200). W should be something like “expected future lifetime spending” in order for this to be a reasonable risk-preference calculation. Further comments assume these are quite poor folks who’ll only ever consume $100k in the rest of their lives.
I guessed high by about 5x. The choice is even more trivial than I thought. I will continue happily playing credit card roulette :)
I agree that measuring by annual income isn’t really legit, but I never know what figure to use here, and it seemed at least like a reasonable lower bound.
Improper measurements. You can’t compare a time-based number (annual income) to a one-time decision (lump sum of $0, $20 or $200). W should be something like “expected future lifetime spending” in order for this to be a reasonable risk-preference calculation. Further comments assume these are quite poor folks who’ll only ever consume $100k in the rest of their lives.
I guessed high by about 5x. The choice is even more trivial than I thought. I will continue happily playing credit card roulette :)
I agree that measuring by annual income isn’t really legit, but I never know what figure to use here, and it seemed at least like a reasonable lower bound.
Just say that you have that much money. Or specify that you do this once a year and you don’t save money between years.