You’re a contestant on the hit new game show, “You Bet Your Fife.” On the show, a random real number (i.e., decimals are allowed) is chosen between 0 and 100. Your job is to guess a value that is less than this randomly chosen number. Your reward for winning is a novelty fife that is valued precisely at your guess.
What number should you guess to maximize the average value of your fifing winnings?
If you guess x∈[0,100], then the payoff function in terms of x and the randomly selected Y∼U(0,100) is v(x|Y)={x,if Y>x;0,if Y≤x. So in expectation, we have V(x)=EY[v(x|Y)]=xP[Y>x]+0P[Y≤x]=x(1−x100).
Since V(x) is continuously differentiable and concave, it is maximized exactly at ˆx which solves V′(ˆx)=1−ˆx50=0. That is, the optimal solution is to choose ˆx=50, at which point V(ˆx)=50(1−50100)=25.
No comments:
Post a Comment