For the PerplexusBowl match between the Pascal Probabilities and the Random Results, a bookie was offering the following payoffs:
PP to win in normal time, 3 to 2
RR to win in normal time, 2 to 1
PP to win in overtime, 7 to 1
RR to win in overtime, 9 to 1
(The first line means that if you bet $2 on PP to win in normal time, and it does, you get your money back plus $3.)
Without knowing anything about football or the involved teams or the actual probabilities, can you show why these payoffs are illogical?
Beting "a" in PP, youŽll gain 5a/2.
Beting "b" in RR, youŽll gain 3b/1.
Beting "c" in PPO, youŽll gain 8c/1.
Beting "d" in RRO, youŽll gain 10d/1.
Total bet: TB = a + b + c + d.
Total gain in normal time: TGNT = 5a/2 or 3b
Total gain in overtime: TGOT = 8c or 10d.
Hyp 1) Normal time:
Netgain = TGNT  TB = 5a/2  (a + b + c + d) = 3a/2  (b + c + d) or 3b  (a + b + c + d) = 2b  (a + c + d).
Hyp 2) Overtime:
Netgain = TGOT  TB = 8c  (a + b + c + d) = 7c  (a + b + d) or 10d  (a + b + c + d) = 9d  (a + b + c).
3a/2  (b + c + d) > 0
2b  (a + c + d) > 0
7c  (a + b + d) > 0
9d  (a + b + c) > 0
3a > 2(b+c+d)
2b > (a+c+d)
7c > (a+b+d)
9d > (a+b+c)
3a > 2b + 2(c+d) > (a+c+d) + 2(c+d) ===> a > 3(c+d)/2
3a + 2b + 7c + 9d > 3a + 4b + 4c + 4d
3c + 5d > 2b ====> b < (3c+5d)/2.
7c > a+b+d ===> d < 7c  a  b
d < 7c  3(c+d)/2  b = 11c/2  3d/2  b
5d/2 < 11c/2  b
5d < 11c  2b
The worst case is b = (3c+5d)/2, then 5d < 11c  3c  5d ===> d = 4c/5.
To be continued.....
Edited on November 26, 2005, 5:58 pm

Posted by pcbouhid
on 20051126 12:14:25 