Expected Value (EV) of Casino Bonuses
Expected Value (EV) is the weighted average of all possible outcomes of a random variable, where the weights are the probabilities of each outcome occurring. It represents the long-term average or mean value that would be obtained if a random experiment were repeated infinitely many times.
The expected value is a fundamental concept in probability theory that provides a measure of the center of a probability distribution. It helps in understanding the typical or average outcome one can expect in the long run, making it crucial for decision-making in various fields including finance, statistics, and engineering.
That looks complicated, but it really isn’t.
In plain English (and if you are a maths buff, you are welcome to pull me up here, but for the sake of what we are trying to achieve here, I am going to oversimplify somewhat).
When applied to a casino bonus, Expected Value (EV) is a mathematical calculation that helps determine the true worth of a bonus offer by estimating how much you can expect to win or lose after meeting all wagering requirements.
That’s the key but underlined. If we were to play this bonus over and over an infinite number of times, what is the mean amount we are expected to win or lose?
So let’s go back to our little example above:
EV = Bonus Amount – (Total Amount to Wager × House Edge)
The expected loss playing with the smaller bonus is much less, and by implication, that means that you have a statistically better chance of a positive outcome when you play with this bonus.
(Note that in theory the EV is the mean over an infinite number of attempts, but the bigger the negative, the smaller the chance of a positive outcome.)
BOTTOM LINE: You should NEVER take a bonus decision by just looking at SIZE of the bonus.