Examples of EV as a good decision rule

• Pricing insurance premiums

  • Actuaries are experts at getting the relevant information that goes into calculating the expected value of a particular policy

• Testing whether slot machines follow state laws about required payout

• Bloodtesting

  • Test each sample individually or in batches of, say, 50?
  • Incidence of disease is 1/100
  • If group test comes back negative, all 50 samples are negative
  • If group test comes back positive, all samples are tested individually
  • What is expected number of tests you will have to conduct if you test in groups of 50?

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