Suppose that you are at a casino playing roulette. The strategy you are using is to, before each bet, flip a coin to determine whether to place your bet on red or on black (which, according to the rules of the game, should each have almost a 50% chance of occurring). After you’ve placed each bet, the roulette wheel is then spun. Suppose that you lose 59 times in a row (i.e. for 59 consecutive plays, when you place your beton black the ball then lands on red, and when you place your bet on red the ball then lands on black). From this experience, it is most rational to conclude that:
a) Using a coin toss to determine whether to bet on red or black is in general a very bad strategy for playing roulette
b) The game is somehow rigged against you and the casino or its employees are cheating you
c) You are very likely to win on your next bet if you continue this coin flip based strategy
d) The roulette game is broken, but there is no reason to assume that it was broken intentionally
e) You were merely very unlucky
f) One cannot reasonably conclude which of the above options is more likely
f is the correct answer just worry about the next part
Ignore the nulls so that P(R) = P(B) = 1/2. Calculate the chances of you losing 59 times in a row and Compare these chances to the odds of winning the NJ lotto (say 1/150M). risk. Yes, you calculated the numbers correctly and you have an edge. But there are other issues to consider before deciding whether to play. The most significant one is “gambler’s ruin”: eveb though you have the edge and would surely win if you can play forever (Strong Law of Large Numbers), you can easily go broke if you have insufficient capital.
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