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microhedge

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  • #1
Okay, let's say I have a little game where the parties consist of me, (A), the casino and the player, (B). The player places his bet with me, and he uses a random number generator to generate one whole number between 1 and 100, inclusive. He wins and gets a certain payout (2x, 3x, 4x, etc) depending on what number he rolled.

My question is:

How should I set up the payout categories in a way that rewards me, the casino, with the highest probability of success, without deterring the player from the game thinking the odds are not in his favor? For example, roll 1 or 100 = 4x payout, 85-90 = 3x payout, 65-80 = 2x payout...

I understand basic game theory, but I am having trouble determining the maximum profit setup for the casino.

Any ideas?
 
spranger

spranger

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  • #2
you would just have to set it up so that for every $1 they gamble, the expected value they get back is 99c. there are zillions of ways to spread it, but it's just all about EV.

one way maybe:
ODD NUMBER = double your dollar
EVEN NUMBER = lose your dollar
BUT 1 is a loss, giving you a tiny edge
 
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