Glossary · Micro · Risk and behavioral economics

Expected value

The average outcome you would get if a gamble were repeated many times: each possible payoff weighted by its probability and added up. A coin flip paying 100 dollars on heads and nothing on tails has an expected value of 50 dollars.

Also called: EV, expected payoff

Taught in: Expected Value

Related terms

Variance and standard deviationRisk aversionCertainty equivalent

More from risk and behavioral economics

Framing effectInsuranceProspect theoryRisk premium

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