All about flooble | fun stuff | Get a free chatterbox | Free JavaScript | Avatars
 perplexus dot info

 Pick a card, any card.. (Posted on 2008-03-11)
You sit down with a well mixed deck containing A cards marked "+" and B cards marked "—". You may draw cards from this deck as long as you want, i.e., you can stop playing at any point. Each time you draw a + card you are given \$1 and each time you draw a — card you have to pay \$1. Cards are not replaced after having been drawn.

What would be a fair amount to pay for the right to play (i.e., what is the expected payoff) and under what circumstance should a player cease drawing?

 No Solution Yet Submitted by FrankM Rating: 2.7500 (4 votes)

Comments: ( Back to comment list | You must be logged in to post comments.)
 re: What's the catch? - it's not that simple | Comment 4 of 37 |
(In reply to What's the catch? by ed bottemiller)

More details:  The question also includes what is the fair amount . . . if A=2 and B=3 the fair amount is \$0.20

A=2 B=3

First Draw

40% A = Profit \$1 Stop (40% Profit \$1)

60% B = Loss \$1 Continue

2nd Draw

50% A = Profit \$0 Stop (30% Profit \$0)

50% B = Loss \$2 Continue

3rd Draw

66% A = Loss \$1 Continue

4th Draw

50% A = Profit \$0 Stop (10% Profit \$0)

50% B = Loss \$2 Continue

5th Draw

100% A = Loss \$1 Out of cards (10% Loss \$1)

Alternate 3rd Draw

33% B = Loss \$3 Continue

100% A = Loss \$2 Continue

100% A = Loss \$1 Out of cards (10% Loss \$1)

Summation (40% \$1 profit, 40% no profit, 20% \$1 loss).

If the bet was less than \$0.20, then one stands to make a profit in the long run.

Edited on March 11, 2008, 4:41 pm
 Posted by Leming on 2008-03-11 15:33:36

 Search: Search body:
Forums (0)