14 Mar '11 00:37>
Has this one been done?
You own a casino. A bright young employee suggests a new game. Players will pay a fee to enter. Then they engage in a series of turns that are really, the same as 50/50 coin tosses, and they know this. If their first tail occurs on turn 1, they get $1. If their first tail is on turn 2, they get $2. If their first tail is on turn 3, they get $4. If it's on turn 4, they get $8. Their potential winnings at the next turn are double the potential winnings at the turn preceding it. They can flip until they flip a tail, or they can declare a tail at a turn they have successfully arrived at, and take the winnings for that turn. After they flip or declare a tail, the game is over.
You know what your target profit margin is, but to establish a profitable fee for this game, you need to know the break-even point; the point at which the income from the fee covers the payouts to winners over time. How much would you need to charge as an entry fee, to break even in this game, over time? Is there more information you need, before you can decide? If so, what is it? Are there any constraints you need to place on the game, before you can set a fee? If so, what are the constraints?
You own a casino. A bright young employee suggests a new game. Players will pay a fee to enter. Then they engage in a series of turns that are really, the same as 50/50 coin tosses, and they know this. If their first tail occurs on turn 1, they get $1. If their first tail is on turn 2, they get $2. If their first tail is on turn 3, they get $4. If it's on turn 4, they get $8. Their potential winnings at the next turn are double the potential winnings at the turn preceding it. They can flip until they flip a tail, or they can declare a tail at a turn they have successfully arrived at, and take the winnings for that turn. After they flip or declare a tail, the game is over.
You know what your target profit margin is, but to establish a profitable fee for this game, you need to know the break-even point; the point at which the income from the fee covers the payouts to winners over time. How much would you need to charge as an entry fee, to break even in this game, over time? Is there more information you need, before you can decide? If so, what is it? Are there any constraints you need to place on the game, before you can set a fee? If so, what are the constraints?