“Sure,” he responds, and you both check your wallets and have 25 dollars each. “Okay,” he says, “now you pick some betting odds, and I’ll choose which side I want to pick.”
“That’s crazy,” you say, “I am going to pick the odds so that I cannot be taken advantage of, which means that I will be indifferent between which of the two options you pick, which means that I will expect to gain 0 dollars from this transaction. I wont take it. It is not fair!”
At first reading I got lost here—why would I say that this is crazy or that the bet is not fair if I expect to gain (and lose) 0 dollars? Is the reason that my opponent would expect (according to their estimation of probabilities of events) to gain from the trade, and it’s not fair for all the gains to be on one side?
At first reading I got lost here—why would I say that this is crazy or that the bet is not fair if I expect to gain (and lose) 0 dollars? Is the reason that my opponent would expect (according to their estimation of probabilities of events) to gain from the trade, and it’s not fair for all the gains to be on one side?
That is exactly right.
Thanks!