Re: Hypothetical Gambling Situation
 

she said to switch. something to do with the bayes theorem.

Re: Hypothetical Gambling Situation
 

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I seem to recall that was in a Marilyn vos Savant column once. She was adamant about the answer despite many readers serious objections. I can't recall the dang details.

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I think you're thinking of Cecil Adams. He got it wrong, but Marilyn was right (this time).

Re: Hypothetical Gambling Situation
 

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If you rent for an extra 6 months due to a downswing in a booming real estate market, you lose a lot more than you would have if you had an upswing or stuck near EV. The "Sklansky Bucks" may be equal, but the real dollars won or lost are far from equal.

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Firstly, yes, the cost of keeping the 5k is basically the amount of time that you have to go without the car, which is significant due ot the shape of your utility curve. The interest doesn't compensate for this, in our current investment climate, though if you consider poker earnings "interest" (which you know you shouldn't), then keeping the 5k becomes much more attractive.

Regarding this point, I think that if you take on high variance with positive EV, you actually lose Sklansky Bucks when you've got something planned like taking out a mortgage... As you take on more variance you have a greater likelihood of renting, whereas the upside of that same variance wouldn't be as profitable to you as the downside would be unprofitable (you save a little on interest when you increase your downpayment, but you lose a lot when you don't have enough to pay it, particularly if real estate is in a downswing at the same time you are).

My response to that sort of situation, as you're aware, is to reduce your bankroll for all risk calculations, instead of your approach, which has been to say that you have baknroll X, but bet in a manner consistent with bankroll Y, where Y is less than X.

I think my approach is best, and it lends itself to evaluating all bets at baknroll Y, so that you avoid situations where betting at bankroll X provides a good but minimally acceptable hourly rate and then you're screwwed because you don't have your mortgage due to downswing. When you start mixing bankroll X and Y in your decisions, rather than using one or the other, you start taking on a real risk of ruin somewhere between your threshold at X and Y, which, if you really had your threshold at Y, means that you're taking on more risk than you desired.

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Likewise, if some individual were planning on buying a big money-pit, pain-in-the-ass, somewhat uneccessary, depreciating asset

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You mean like a car, right? [img]/images/graemlins/smile.gif[/img]

Let's just say that there are some utility factors involved here that supercede money. I intend to prove people wrong who say, "Man can not live on 'digs' alone."

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Tubasteve, what's discrete math? I'm kinda curious. I think I used to call it Finite when I was in highschool, but I"m not sure.

Re: Hypothetical Gambling Situation
 

I've missed you, Dave. I haven't had a good headache in 6 weeks.

Re: Hypothetical Gambling Situation
 

Yes Marilyn vos Savant wrote about the Monte Hall Question and proved that switching doors will win you the prize twice as often as the goat. Apparantly, all sorts of academics and statisticians wrote to her to tell her she was wrong and that the odds were 50/50.

The Cecil Adams article is interesting because he asserts that Marilyn is wrong. Then he actually admits that Marilyn is right but manages to back pedal and say that she is not entirely right because you can not assume that Monte Hall will even open a door. I think he's reaching at straws there.

I first heard about it when my statistics professor used the Monte Hall Question to explain Bayes Theorum in his class (and since Bayes Theorum deals with givens), he proposed that it is a GIVEN that Monte Hall will ALWAYS show you an empty door.
It was pretty amazing how many people in that class still insisted that switching doors is a 50/50 proposition. I think Bayes Theorum is what confused them in the first place. Ultimately, it's a complicated way of explaining a pretty simple concept.

Re: Hypothetical Gambling Situation
 

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I've missed you, Dave. I haven't had a good headache in 6 weeks.

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holy crap, just got back from class and read the new stuff, I think I wanna return back to class now...less thinking involved...

Crovax

Re: Hypothetical Gambling Situation
 

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I've missed you, Dave. I haven't had a good headache in 6 weeks.

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This is classic dude. NH. [img]/images/graemlins/laugh.gif[/img]

Re: Hypothetical Gambling Situation
 

No, poker is not an interest garnering activity. The whole point is that the money can be used to create more money. There is a big difference in the dictionary but a small one on paper when we're talking about opportunity costs of not having money. I gather the point itself was clear.

The correct approach is to adjust bankroll based on your evaluation of what you'll need and how likely you are to need it. It just doesn't have to be 100%. "Calculated Risk" is the whole point, whether you are investing or gambling. The way poker players normally manage their bankroll is actually very conservative. (Which is fine, but not necessary for everyone.) The entire business world has been doing just fine using weighted probabilties of both likelihood and importance for their spending decisions with respect to their cash holdings. Maximizing utility often involves making probablistic estimates about what you're likely to need, when you'll need it, how likely you're going to need it, and how much (qualitatively, urgently) you'll need it if you do.

If you're doing that, your approach is best. It's not really proprietary - lol. [img]/images/graemlins/smirk.gif[/img]

Certainly a car counts as "a big money-pit, pain-in-the-ass, somewhat uneccessary, depreciating asset." I know mine does. [img]/images/graemlins/laugh.gif[/img]

See you shortly...

Re: Hypothetical Gambling Situation
 

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What should you do, and why?

a) Double up twice. ($5->$10->$20) (25% chance)

or

b) Quadruple up once. ($5->$20) (25% chance)

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*grunch*

At first I thought it was obvious that it was the same, but then it hit me. If the deck is not reshuffled on the second option, then you should obviously try option b and choose 2 red once and black once. This option actually has about a 2% player edge, if I'm understanding the problem correctly. The first choice is still 26/52, but the second is 26/51 if the first is correct.

Re: Hypothetical Gambling Situation
 

Umm...apparently I misunderstood the question. And I don't know anything about utility. So, uh, nevermind.