CANNAINVESTOR Magazine December / January 2016 - Page 117

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A text book introductory example of probability (“Monty Hall Problem”) illustrates how users of information attempt to manipulate people to achieve a desired result. A popular TV Game Show from days gone by was “Let’s Make A Deal”. One of the games that contestants played involved three doors. Behind one door was a major prize, such as a car, and behind the other two doors was nothing often represented by goats. The game was simple:

1) The contestant must choose one of three doors that are closed and the chosen door will not be opened until the game is over. Door#1 is chosen.

2) The host knows which door has the car behind it and opens one of the two remaining doors and reveals a goat.

3 )The host offers the contestant the opportunity to switch doors.

Without a relevant background, some believe that there is a 50/50 chance of winning the car since there are two doors left and the contestant is free to choose which of the two doors they want opened. That is incorrect as the following table illustrates.

From a

Retail Investor's Perspective