- 04 Jul '09 07:41A man offers you this bet;

He will flip a coin and you call. The coin is fair.

If you win he gives you £2.

If you lose you give him £1.

If you win you can play on. Same odds.

(ie If you win he gives you £6 if you lose you give him the £3.)

You can only continue playing after a win.

You must invest all your money if you continue.

What is your strategy to maximise your winnings?

(ie after how many wins do you stop playing)

What are your average winnings with this strategy?

(ie if you played the game each day what would you expect to be up after a year?) - 05 Jul '09 12:10

If you keep winning, no problems.*Originally posted by wolfgang59***A man offers you this bet;**

He will flip a coin and you call. The coin is fair.

If you win he gives you £2.

If you lose you give him £1.

If you win you can play on. Same odds.

(ie If you win he gives you £6 if you lose you give him the £3.)

You can only continue playing after a win.

You must invest all your money if you continue.

What is you ...[text shortened]... his strategy?

(ie if you played the game each day what would you expect to be up after a year?)

Once you lose you can't continue and you will have a total loss of 1 pound.

In one game you'd expect to win 0.5 * 2 + 0.5 * -1 = 1/2 pounds.

After two games you'd expect to win

0.5 * -1 + 0.25 * -3 +0.25 * (6+2) = 3/4

After three games

0.5*-1 + 0.25*-3 + 0.125*-9 + 0.125*(18+6+2) = 7/8

After N games: (2^N - 1)/2^N.

Still working on optimal strategy. - 05 Jul '09 12:59

Well, it's easy to see that the payoff is monotonically increasing in N. This is a variant of the St. Petersburg paradox.*Originally posted by TheMaster37***Say p is the chance you'll continue after winning.**

For 4 games:

profit = 1/2 + 1/4 p - 1/8 pp + 1/16 ppp - 5pppp

I'm not going to try to find the maximum for n games, I'll make too many mistakes - 05 Jul '09 12:59 / 1 edit

Never.*Originally posted by wolfgang59***The question is WHEN DO YOU QUIT?**

Simple game but what is optimum strategy?

Edit - Obviously, the St. Petersburg paradox shows the flaws of using expected winnings maximization as the measure for optimal strategy. This is especially true when expected winnings are infinite, but require infinite time to reach. - 05 Jul '09 13:08

Thanks for that Palynnka never heard of that paradox before. My question came from me trying to simplfy the best strategy for a game called Pass the Pigs.*Originally posted by Palynka***Never.**

Edit - Obviously, the St. Petersburg paradox shows the flaws of using expected winnings maximization as the measure for optimal strategy. This is especially true when expected winnings are infinite, but require infinite time to reach.