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Paid redraws from a hat numbered 1 to 100

Question

A hat holds slips numbered 11 to 100100. Each round costs $1: AJ draws a slip, records its number and returns it. He may play as many rounds as he wants, and when he stops he receives in dollars the last number recorded. With optimal stopping, what is the game worth?

Short answer

1209/14≈86.361209/14\approx86.36. Use a threshold xx: stop at the first draw of at least xx. The value is 100+x2−100101−x\tfrac{100+x}{2}-\tfrac{100}{101-x} (mean of the accepted draws minus the expected number of $1 fees). Over integers this peaks at x=87x=87, giving 93.5−10014=12091493.5-\tfrac{100}{14}=\tfrac{1209}{14}.

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

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