The important thing for this question is to not go outside the scope of information given. All of the answer choices contain flawed reasoning, but we only know one of them has been expressed.
Tony's argument: Play when there have been few winners, as pot is larger
Bagg's argument: Play when pot is small, more likely to win
when less people playing
Tony's argument is not flawed. Based on the information he has provided, if there have been no winners, then the pot will be larger.
Bagg's argument is flawed. The number of people playing does not affect the odds of winning.
A) Tony does not hold this. He doesn't mention the number of times people play.
B) Baggs has said exactly this, and it is flawed reasoning.
C) Tony has not said this. It may very well be true, and tony may or may not have factored this into his preference. We don't know.
D) Baggs has not said this.
E) Tony has not said his chances improve, just that the pot gets bigger.