The Annals of Statistics

Discounted and Rapid Subfair Red-and-Black

Stuart Klugman

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A gambler seeks to maximize the expected utility earned upon reaching a goal in a game where he is allowed at each stage to stake any amount of his current fortune. He wins each bet with probability $w$. In the discounted case the utility at the goal is $\beta^n$ where $\beta$, the discount factor, is in $(0, 1)$ and $n$ is the number of plays used to reach the goal. In the rapid case the utility at the goal is 1 and the gambler seeks to minimize his expected playing time given he reaches the goal. Here all optimal strategies are characterized when $w \leqq \frac{1}{2}$ for the discounted case and when $w < \frac{1}{2}$ for the rapid case. It is shown that when $w < \frac{1}{2}$ the set of rapidly optimal strategies coincides with the set of optimal strategies for the discounted case.

Article information

Ann. Statist., Volume 5, Number 4 (1977), 734-745.

First available in Project Euclid: 12 April 2007

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Zentralblatt MATH identifier


Primary: 60G35: Signal detection and filtering [See also 62M20, 93E10, 93E11, 94Axx]
Secondary: 93E99: None of the above, but in this section

Gambling problem red-and-black optimal strategy bold strategy stop rule


Klugman, Stuart. Discounted and Rapid Subfair Red-and-Black. Ann. Statist. 5 (1977), no. 4, 734--745. doi:10.1214/aos/1176343896.

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