Question
Regarding the gambler's ruin. Suppose the odds are against the gambler, as in probability of heads being 45%. The gambler continues to make bets until
Regarding the gambler's ruin. Suppose the odds are against the gambler, as in probability of heads being 45%. The gambler continues to make bets until 1 of 2 events occur: she has 100. We are interested in how small changes in capital affect the final policy.
1) Suppose the gambler has 50 dollars. What bet does she make?
2) Suppose the gambler has 51 dollars. What bet does she make?
3) Is the bet proportional? Why or why not?
4) Are there points where the gambler behaves very differently?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
1 If the gambler has 50 the optimal bet she should make is 1 This bet ensures that if she wins she r...
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Finite Mathematics and Its Applications
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair
12th edition
978-0134768588, 9780134437767, 134768582, 134437764, 978-0134768632
