Question
Suppose 4 people each start with $10. In each of 2 periods, each person flips a coin (50% probability of heads or tails). b. Suppose
Suppose 4 people each start with $10. In each of 2 periods, each person flips a coin (50% probability of heads or tails).
b. Suppose that each time a person flips heads, their wealth increases by 70%. If they flip tails, their wealth decreases by 30%. On average, what fraction (or percentage) of the total wealth would you expect the richest person to have in each period?
a. Now, repeat the exercise in a. above, but with tails decreasing wealth by 70% (heads still increasing wealth by 70%). On average, what fraction (or percentage) of the total wealth would you expect the richest person to have in each period?
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