Continuing with yesterday’s theme of gambling, I would like to present a framework for optimal gambling strategy at a casino.
Some Key Assumptions
First, I assume that all possible gambles you can make at a casino have negative expected value. I am not considering counting cards, controlled shooting, cheating, or games of skill like poker. Second, I assume that the player is risk adverse. I realize that this assumption may not be true in reality since some individual players may be risk seeking when it comes to small sums of money at a casino. Still, I think this assumption is reasonable, especially as the amount a player wagers increases. I also think that adopting a risk adverse mentality will lead to better gambling strategy as I explain below.