Conundrum: A Fair Deal
Tuesday, June 5th, 2007I often like to come up with games of chance. There have been times in my life when this has been profitable, but mostly I’m just interested in questions of statistics and probability.
I had considered the math behind putting together my own Deal or No Deal style game, but with greatly reduced suitcase amounts and with a cost to play. Determining a fair cost (one which I would agree to if I were the player or the banker) at first seems like a hopelessly difficult problem, but the math is actually quite simple. The player has the option of keeping the initial suitcase until the end, and the banker has the option of offering whatever small amount he wants. At any given time the chosen suitcase is worth the average of all unopened cases. The banker certainly isn’t going to offer more, and if the player accepts less it’s just because he’s hedging his bets. The cost to play should be the average of all of the cases, whatever they may be.
A couple of months ago, while discussing the Two Envelopes problem, we briefly discussed what’s known as the Monty Hall problem, after the host of Let’s Make A Deal. Thinking of that problem has inspired another gambling proposition which is this week’s Conundrum.
Let’s continue to call our two gamblers the banker and the player. The banker has three boxes and hides a $10 bill in one of the boxes and a $1 bill in each of the other two. The player pays a set amount to the banker and chooses one of the three boxes. The banker must then open one of the other two boxes and show the player a $1 bill. Then the player can decide whether to keep the contents of the box he chose or switch to the other unopened box.
What would be the fair amount for the player to pay the banker to play this game?
UPDATE: Question solved by David. See comments for the answer.