129: Victor Haghani – Optimal Bet Sizing—Lessons From a Biased Coin Flip Experiment
Chat With Traders
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How Much Would You Pay to Play a Game Uncapped?
The saint petersburg paradox is about a game of chance similar to this one, that has an expected value equal to infinity. But people are only willing to pay like ten dollars to play it because the expected utility of the game has a value equivalent to ten dollars. So in this game, the expected value, uncapped, would be three million dollars. If you flipped the coin 300 times, and every time you bet 20 % on it, that would be like a four percent return on every flip,. And so that's where you get to the three million dollars from the starting point.
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