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?
(In reply to re: Incorrect assumption
by ed bottemiller)
Here are the answer your questions:
(1) does the putative player know the values of A and B at the outset?
Yes, he does.
(2) is the fee to play (re "a fair amount to pay for the right to play") a one-time up-front fee, or is it before each draw?
It is a one-time, up-front fee.
I try to be clear as possible with the problem formulation. Sorry if these points needed more attention.
Posted by FrankM
on 2008-03-24 16:33:41