On... Coin Flips
I first came across the coin flip discussion in Nick Maggiulli’s blog post . Here is my simplified and slightly different take on the subject . Assume I offer you a coin flip bet, in which, you earn 60$ if the coin lands on head and you pay 50$ if the coin lands on tail, would you play? Of course you would. How can you lose money in such a game? I simulated 10 scenarios of 10 consecutive flips; and Scenario 4 ( worst case scenario ) came out as follows:- HEADS, HEADS, TAILS, TAILS, TAILS, TAILS, TAILS, TAILS, TAILS, TAILS. Only 2 flips out of 10 came out heads, which is a probability of 20%. Whats happening? Is the coin rigged? Isn’t a coin flip supposed to have 50% probability? The chart above shows the results of all 10 simulated scenarios ( chart showing probability of flipping heads ); and it apparently isn’t 50%??!!!. In fact, the range is quite wide with scenarios ranging from 20% to 60%. The chart below shows the money lost/gained for each c...