A lottery that pays off P300 000 000 is made available for 10 000 000 tickets. Each ticket costs P50. Suppose the variable Z gives the net winnings from playing the lottery. What is the expected gain for joining the lottery with only one ticket?
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Solution:
The expected gain of a ticket is:
= (1 / 10000000) [(300000000 - 50) + {(10000000 - 1) (-50)}]
= (1 / 10000000) (299999950 - 499999950)
= (1 / 10000000) (-200000000)
= -20
A person who continues to play this lottery for a very long time will probably win some money occasionally but on average will lose P20 per ticket.