Stopping threshold in continuous blackjack
Question
A gambler and a dealer play a continuous version of blackjack using independent draws.
- The gambler goes first, drawing numbers and adding them up. After each draw he may stop or draw again. If his total ever goes above , he busts and the dealer wins.
- If the gambler stops with total , the dealer then keeps drawing uniforms and accumulating them. Should the dealer's running total land strictly between and , the dealer takes the game; should it overshoot first, the gambler takes it.
The gambler uses a threshold rule: draw again while his total is below and stop once it reaches or more. The value of that maximises his chance of winning satisfies for some integers and , where is Euler's number. Compute .
Short answer
. Standing on loses with probability , since the dealer's partial sums fall below for draws with probability and then need one draw into . Drawing once more and then standing loses with probability . Setting these equal gives , so , (and ).
Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.
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