Monday, May 22, 2006

One of the most valuable uses to which a gambler can put his knowledge of probabilities is to decide whether a game or proposition is fair, or equitable. To do this a gambler must calculate his expectation. A gamblers expectation is the amount he stands to win multiplied by the probability of his winning it. A game is a fair game if the gamblers expectation equals his stake. If a gambler is offered 10 units each time he tosses a head with a true coin, and pays 5 units for each toss is this fair game The gamblers expectation is 10 units multiplied by the probability of throwing a head, which is 1/2. His expectation is 10 units = 5 units, which is what he stakes on the game, so the game is fair. Read further...