Paper: SSRN 2856963

Abstract

What would you do if you were invited to play a game where you were given $25 and allowed to place bets for 30 minutes on a coin that you were told was biased t

Complexity vs Empirical Score

  • Math Complexity: 4.0/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper presents experimental results from a controlled betting game with a human subject pool, implying data collection and analysis of observed betting patterns, but relies on standard probability and decision theory rather than advanced mathematical formalism.

Research Flowchart

  flowchart TD
  A["Research Goal:<br>Analyze betting behavior<br>on a biased coin"] --> B["Method: Lab Experiment<br>$25 starting balance<br>30-minute betting session"]
  B --> C["Data Input:<br>200+ Subjects<br>High-frequency<br>betting records"]
  C --> D["Computational Model:<br>Estimate subjective<br>probability beliefs<br>via Maximum Likelihood"]
  D --> E{"Key Findings"}
  E --> F["1. Strong Bias<br>Aversion: Under-betting<br>the actual 60% heads"]
  E --> G["2. Probability<br>Misestimation: Subjects<br>perceived ~50/50 odds"]
  E --> H["3. Loss of Expected Value:<br>Conservative betting<br>reduced returns"]