Replying to the OP directly, she made a good bet, and she should never cancel it. She's getting 3/2 on a coin flip. Am I wrong?

If each time she wakes up, she is given a bet as to whether or not it is heads, I believe that should pay 2/1. But that bet before the experiment begins should pay 1 to 1.

She certainly shouldn't cancel the bet if she's only allowed deterministic strategies, since then her only options are "always cancel" and "never cancel," so it comes down to a 3:2 bet on a coin flip. If she's allowed probabilistic strategies, it's another story, but that's because she'll be deciding twice, not because the probability of the original flip changes.

Quote:24BingoI'm pretty sure it's 50/50, since she's been given no new information. Or coming at it from another angle, waking up, she's half as likely to have woken up in either of the worlds where she will have been woken up twice. Picture an item that fell out of a box, where one item in each box is special in a way not immediately identifiable. Doesn't the chance you've gotten the specified item depend on the number of items in the box? Now say you've got boxes of eight marbles, forty, and three hundred. First one box is chosen at 1/3 probability of each, then one marble from that box. Does the fact that the larger box has more marbles make it more likely that that marble comes from that box?

She certainly shouldn't cancel the bet if she's only allowed deterministic strategies, since then her only options are "always cancel" and "never cancel," so it comes down to a 3:2 bet on a coin flip. If she's allowed probabilistic strategies, it's another story, but that's because she'll be deciding twice, not because the probability of the original flip changes.

In one of the cases, she is awakened twice. The other case she will be awakened once.

If she always says tails, then she will win 2/3 of the time. If she says heads, she will win 1/3 of the time.

If the bet is not canceled, she will win $1500 if the coin comes up heads and will lose $1000 if the coin comes up tails. When awakened on Monday and perhaps Tuesday she may cancel the bet. If she cancels on Monday but is awakened and decides not to cancel on Tuesday, the bet remains canceled.

This is a a good bet for her. If her strategy is never to cancel, her expected winnings are $250. But she can do better.

Her best strategy is to cancel with probability 1/4 whenever she is awakened. Her expected winnings in this case are $281.25.

Quote:RSIf she always says tails, then she will win 2/3 of the time. If she says heads, she will win 1/3 of the time.

She'll be winning 2/3 of the times she speaks, but only in half the experiments. It's just that she gets to be right/wrong more often in one. If every time a red card hits the felt, you put it back into the shoe and pull it out again, does that mean twice as many red cards are dealt?

Concerning the belief:

Most people would agree that as she is put to sleep her belief is 50% that the coin will show heads and 50% that it will show tails. Now the only reason one should change one's belief is if one obtains new information. Whenever she is awakened she obtains no new information, therefore she should not change her belief.

Concerning the OP's bet:

I pointed out earlier that for the OP's specific bet, her best strategy is to cancel the bet with probability 1/4 whenever she wakes up, resulting in an expected value to her of $281.25. (Recall that if she cancels on Monday, but doesn't cancel on Tuesday, the bet remains canceled.)

Concerning a bet in general:

Consider a bet in which, if the bet is not canceled, she receives H if the coin shows heads and T if the coin shows tails. (Here H and T can be negative, so for the OP's bet, H = $1500 and T = -$1000.) Her best strategies and the results are as follows:

If 0 < H < -2T, then she should cancel with probability (H + 2T) / (2T) whenever she wakes up and thus earn an expected return of H*H / (-8T),

Otherwise, if H + T > 0 she should never cancel and thus earn an expected return of (H + T) / 2.

Otherwise she should simply not take the bet, or equivalently, always cancel whenever she wakes up and thus earn an expected return of 0.

Note that it may be possible for her to turn what looks like a bad bet into a good one by judiciously canceling. In a previous example of mine, H = $64,000 and T = -$128,000, which looks like bad bet. But if she cancels the bet with probability 3/4 whenever she is awakened, her expected return is $4000.

The betting result is obtained by noting that the expected return is a quadratic function of the probability of canceling (or more easily in terms of the probability of not canceling). Maximizing a quadratic function over an interval simply requires checking the returns at the endpoints and the return at the inflection point of the quadratic (if it is in the interval).

What I can gather is you have to decide is it halves or thirds.

Heads 3:2 | Tails 1:1 | EV for Heads @ $1000 |
---|---|---|

1/3 | 2/3 | 500 - 666.66 = -166.66 |

1/2 | 1/2 | 750 - 500 = 250.00 |

I hope my math is right.