stment or a series of investments that have the potential to bankrupt an investor is known as “gambler’s ruin.” Your utility for a positive €1,000,000 is considerably less than 1,000 times greater than it is for €1,000. By analyzing your responses to a series of similarly constructed alternatives, an individual with game theory expertise could construct your “indifference curve.” Your personal utility and indifference curves and those of the decision maker are not as important as is the utility functions of the corporation. For our purposes we will assume that the corporation has a unit slope linear utility function and makes its decisions entirely on EMV. Exceptions to this would only occur for massive investments.
In the drill vs farmout example, we had a decision tree that looked like the following:
There were only two decisions, drill or farmout. The probability nodes were only dry hole or discovery. The analysis of a decision tree proceeds from right to left as the EMV is calculated for each probability node. The expected value of each probability node is replaced with its expected value and the highest EMV decision node is selected. There can be multiple probabilities at each probability and the probability node can be replaced by Monte Carlo simulations. In fact, the entire decision tree can be replaced by Monte Carlo simulations with a distribution of decisions being made and the corresponding variability in results conveyed to decision makers.
 Consider the trivial case of 38 players each betting $1,000 on one each of the 38 spots and play one time. One person will walk away with $36,000 (his bet plus his $35,000 in winnings) while 37 players lose their bets. The house makes $2,000.
 Coin collectors refer to the obverse and reverse of a coin rather than “heads” or “tails” but we will use the more common convention.