Comment by quickquest
7 hours ago
For the coin flipping scenario, what happens to the casino? Shouldn't they lose money in the long run as well? Or is it that they're under the kelly threshold with all the house cash?
7 hours ago
For the coin flipping scenario, what happens to the casino? Shouldn't they lose money in the long run as well? Or is it that they're under the kelly threshold with all the house cash?
The casino will break even, but for the gamblers there will be a small number that win big, and a much larger number that lose out. Consider two rounds, there's a 25% chance you 4x your money, a 50% chance you 0.75x your money and a 25% chance you 0.25x your money