Comment by minitoar
4 years ago
I used this to win AI Rock Paper Scissors competition in undergrad. I just played random symbols, but used Kelly criterion to compute my bid. This worked well because the game wouldn’t allow your bankroll to go to 0 — the floor was 1.
Can you explain why the Kelly criterion wouldn't have you bet 0 every time? The chance of winning a round of rock-paper-scissors when throwing a random symbol seems to be 50% (if ties cause re-dos), so wouldn't that work out to 50 * 2 - 100 = 0?
It’s a good question. You’re right, if I followed it strictly it wouldn’t work. I suppose I rationalized offsetting it because I couldn’t actually go bankrupt. If I was better at math there’s probably some other criterion that takes into account how hard it would be to get back to where you are, given that you couldn’t go below 1.
That's strange, given that the Kelly criterion maximizes the expectation of the log of wealth--that is, it's maximizing over multiplicative percent gains in a scenario where you can go bankrupt.
I don’t get why it’s strange? What I learned from that competition was that bid sizing was way more important than the symbol selection strategy. Trying to beat the other students at iocaine powder wasn’t really a winning proposition.