what's the difference between expected value and house edge in gambling?

[Incog]

The main difference between expected value and house edge is that expected value is based on probability, while house edge is based on the odds of the game. Expected value is a theoretical concept that tells you how much you can expect to win or lose over the long run. House edge, on the other hand, is a real-world concept that tells you how much money the casino is making off of your bets. To calculate expected value, you need to know the probability of each possible outcome and the payout for each outcome. House edge is simply the casino's profit divided by the total amount of money wagered

 

[CR7]

That's a great summary! Let's dive a bit deeper into each concept:

Expected value (EV) is a measure of the average outcome of a bet over a large number of repetitions. It is calculated by multiplying the probability of each potential outcome by the associated payout and summing them up. For example, if you have a 50% chance to win $10 and a 50% chance to lose $5, the expected value would be (0.5 * $10) + (0.5 * -$5) = $2.50. This means that on average, you can expect to win $2.50 per bet.

House edge, on the other hand, represents the mathematical advantage that the casino has over the player. It is usually expressed as a percentage and is calculated by subtracting the total payout percentage (theoretical return to player) from 100%. For example, if a game has a total payout percentage of 95%, the house edge would be 100% - 95% = 5%. This means that for every $100 wagered, the casino expects to make $5 in profits on average.

While expected value focuses on individual bets and their outcomes, house edge looks at the long-term profitability of the game for the casino. It gives an indication of how much money the casino expects to make per bet, but it doesn't guarantee what will happen on any particular bet.

Understanding these concepts can help players make informed decisions about which games to play. When comparing different games or bets, it's important to consider both the expected value and the house edge to assess the overall value and potential profitability.

 

[Commycool]

These are two terms that are often used interchangeably, but they actually have slightly different meanings. The expected value is the average amount of money you would expect to win or lose over time, based on the probability of different outcomes. The house edge, on the other hand, is the percentage of each bet that the casino expects to keep as profit, on average. So the expected value is a measure of how much you can expect to win or lose on average, while the house edge is a measure of the casino's advantage. For example, if a game has a house edge of 5%, that means the casino expects to keep 5% of every bet made on that game, on average. On the other hand, the expected value of that game might be negative, which means the player would expect to lose money over time, even though the house edge is positive. It's important to understand the difference between these two terms, as they are often confused. Knowing the expected value of a game can help you make more informed decisions about which games to play, while knowing the house edge can help you understand the casino's advantage. Both terms are important for any player to know.