Decision Making - Part 1

A couple of years ago in Las Vegas, I bet \$110 on a three-game parlay during the first week of the NCAA basketball tournament. A three-game parlay requires that a bettor must correctly pick the winner of all three games (including point spreads) and pays 6 to 1 odds.

I picked the correct winner for the first two games and found myself faced with a decision before the third game started. Do I hedge this bet? Hedging a bet is where a bettor places a second bet against the first bet to guarantee winning or breaking even.

If I do not hedge my bet, then I have three possible outcomes:

1. Win \$600 plus original bet of \$100 and \$10 vig

2. Lose \$110

3. Push 3rd game, which defaults a 3-game parlay to a 2-game parlay payout with a 2.6 to 1 odds resulting in \$260 winnings plus original bet of \$100 and \$10 vig

If I hedge my bet, that would require me to place \$121 on the opposite team in the third game. This would result in two possible outcomes:

1. Win \$490 plus original bet of \$100 bet and \$10 vig

2. Break Even because of winning \$110 plus hedge bet of \$121 bet and \$11 vig

3. Push 3rd game, win \$139 plus original bet of \$100 and \$10 vig

A summary of the possible outcomes are in the following table.