You look at a carnival game. The person running it says, "Just reach your hand into this bag. There are 9 yellow balls and 1 red ball in the bag. You get 4 chances to pull out the red ball. (You have to put the ball you drew back before you draw another ball.) You only have to pay one dollar to play, and you get 3 dollars if you pull out the red ball!"

Assuming the person running the game is telling the truth, and the balls only differ in color, would you expect to make a net profit or a net loss on this game?

(In reply to Corrected Simulation Results by Charlie)

You value a win at 10xing or more your money, and a loss as losing 1x your money... that does not make this a bad game, this makes it a game that is on average winning, even though it loses more often than wins under your framework.    

Posted by Mike Graham on 2004-12-11 22:01:21