BAR Decision Analysis · Updated November 2026
Expected Value: Do You Pick the Most Likely Outcome?
Expected value uses every modeled outcome and its probability, not only the most likely result.
Expected value
For each outcome, multiply probability by outcome and sum the probability-weighted amounts.
Decision tree
A decision tree maps decisions, chance events, probabilities, cash flows, and expected outcomes.
Most likely vs expected
The single most likely result is not necessarily the same as the probability-weighted average.
Limitation
Expected value does not capture every decision maker's risk preference or strategic concern.
The takeaway
Multiply each outcome by its probability and add the results. The expected value may be an amount that never literally occurs.
Related Summit guides
FAQ
Can expected value be an amount that never actually occurs?
Yes.
Do probabilities need to sum appropriately?
Yes.
Does highest expected value capture all risk preferences?
No.