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The previous note refers to increasing bet size on profitable trades ; even
for a a negative expectancy game.
Statistically/practically , it cannot be done.
A simple example will suffice from the real world....without going into
probability calculations and analysis.
A insurance company bets that 5 people will die when it writes a 1000
policies.
It knows the number from historical figures / acturial tables. But it cannot
pinpoint or identify the 5 people. It knows that if it bets on 1000 people ,
it will be ahead of the game.
Now if 500 people were to die, it will be a negative expectancy game at the
present insurance premiums. To bring it back to equilibrium, the policy
premiums will have to be higher.
To avoid this situation, a insurance comp. will write policies among a
diverse group of participant ... different age group/race/geogrphical area
etc.
If it doesnt, its asking for trouble (the Lloyd names of London/ 20 th
century of California with their 1988 earthquake problems , etc.)
Another example will be a unskilled angler... if he were to go fishing a 100
times, chances are he will catch a fish. But I will not like to bet on his
which try. Could be his very first or the eighty seventh time.
A hypothetical question will be... why would people pursue a negative
expectancy game.... for the very same reason that people smoke, shoplift,
drink and drive, or drive at 100 mph in a 40 mph zone or buy a lottery
ticket with their last dollar.
A good book on this subject is the one already mentioned or any book on
"game theory" from a college library.
> >For a better explanation than I can give, follow this link to the online
> book,
> >"The Mathematics of Gambling" by Edward Tharp. One of the later chapters
in
> >the book discusses this very topic.
> >
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