Risk In The Real World

Multiplicative Payoffs

Suppose you find a new game in your neighborhood casino. It costs $100 to play. Your bet is put into the pot. Your payoff is determined by 10 consecutive coin tosses.

  • After each heads the pot increases 50%.
  • After each tails the pot decreases 40%.

After 10 tosses, whatever's in the pot is yours.

coin embedded in snow

You perform some quick calculations and find the expected value of the pot at the end of the game is about $162.88.

Would you play?

Current Value