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?
Based on the iterative table from my previous post, only play when the amount to be bet is less that what is listed on the Fair Amount Table.
For each round, continue to draw cards while the ratio of cards remaining (A vs B) has a profitability of 1.0 or greater (as shown of the table). Otherwise one is more likely to lose money than gain money.
(after some thought - I am not sure of this conclusion)
Edited on March 11, 2008, 8:00 pm
Posted by Leming
on 2008-03-11 19:52:09