Link: Rational Decision-Making under Uncertainty: Observed Betting Patterns on a Biased Coin
Imagine tossing a 60% coin 100x and starting with a $25 bankroll
The mean of one flip is 20% positive expectancy.
Optimal bet size is 20% of bankroll since you have .20 expectancy per toss
Increase in wealth per toss betting a Kelly fraction: 20% of bankroll x .20 expectancy = 4%
Expected (mean) value of game after 100 flips betting 20% of your wealth each time
$25 * (1+.04) ^ 100 = $1,262
The median of one flip betting a Kelly fraction is (1.2^.60 * .8^.40 – 1) or 2%
Median value of game after 100 flips betting 20% of your wealth each time
25 * (1.2^60) * (.8^40) = $187.25!
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