ABSTRACT

What is an expected gain? Consider a simple case where you have two sealed envelopes, one with a cheque for a hundred euros in it and the other with a cheque for five hundred euros, but you do not know which is which. You select one of the envelopes at random. You have a 50% chance of picking the envelope with the hundred-euro cheque in and a 50% chance of picking the other one. Your expected utility is then half of €100 plus half of €500, i.e. €300.