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
re(4): Solution by Brian Wainscott)
Backing up Bryan's comments on needing to be able to ride out losing streaks, a simulation shows that, for example, if the player starts with a bankroll of $10 and a goal of playing until that has grown to $100, in 100,000 simulations of this situation, the player got to the $100 only 28% of the time, having lost the whole $10 72% of the time. It took an average of about 1400 plays to win when she did so, and 243 plays to lose when that happened.
When greedier, and going for $1000, she still lost about the same percentage of the time, but took on average about 343 plays to lose, and about 30,000 plays to win.
And when starting out with a measly $1, trying to leave with $100, she won not much more than 3% of the time (but of course gaining $100) and took an average of about 24 plays for a loss or 1400 plays for a win.
So, yes, losing streaks are statistically "inevitable" (or rather, merely likely), and the house has the "advantage" of a bigger bankroll against an individual, though with these odds not against the public at large.
The results (first line in each pair showing initial bankroll and goal; second line showing the number of trials, number of wins, number of losses, average number of plays for a win, and average number of plays for a loss) of several trials are:
10 100
100000 28133 71867 1419.564 242.7117
10 1000
1000 275 725 29941.54 343.24
1 100
100000 3288 96712 1425.148 24.40842

RANDOMIZE TIMER
res0 = 1
goal = 100
FOR trial = 1 TO 100000
res1 = res0
tot = 0
DO
IF RND(1) < .3439 THEN
res1 = res1 + 2
ELSE
res1 = res1  1
END IF
tot = tot + 1
LOOP UNTIL res1 < 1 OR res1 >= goal
IF res1 < 1 THEN
loss = loss + 1:
ltot = ltot + tot
ELSE
win = win + 1
wtot = wtot + tot
END IF
NEXT trial
PRINT res0, goal
PRINT trial  1, win, loss, wtot / win, ltot / loss

Posted by Charlie
on 20030918 17:25:04 