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Unlimited dollar rerolls of a die

Question

Alice rolls a fair six-sided die. After each roll she may stop and collect the number showing, in dollars, or pay $1 to roll again; there is no limit on the number of rerolls. With optimal play, what is her expected net payout?

Short answer

44. The game looks the same after every reroll, so the best strategy is a threshold: stop on kk or more. Its value solves v=k−16(v−1)+16∑j≥kjv=\tfrac{k-1}{6}(v-1)+\tfrac16\sum_{j\ge k}j, which gives v=4v=4 for k=3k=3 or k=4k=4 and less for any other threshold.

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

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