Analyzing the Setup
To solve this problem, we must visualize the game as a branching path, or a probability tree. On any single throw, the probability of winning, P(W), is 62, which simplifies to P(W)=31.
Conversely, the probability of losing, P(L), is 64, which simplifies to P(L)=32. We are limited to a maximum of three throws, and the game terminates immediately upon a win.
Mapping the Possibilities
We define the outcomes based on the sequence of events:
Path 1: You win on the first throw.
The probability is 31, and your gain is +100.
Path 2: You lose the first, then win the second.
The probability is P(L)×P(W)=32×31=92.
Your net gain is −50+100=+50.
Path 3: You lose the first, lose the second, then win the third.
The probability is P(L)×P(L)×P(W)=32×32×31=274.
Your net gain is −50−50+100=0.
Path 4: You lose all three throws.
The probability is P(L)×P(L)×P(L)=(32)3=278.
Your net gain is −50−50−50=−150.
The Expected Value Synthesis
The Expected Value, E(X), is the weighted average of all possible outcomes, defined by the formula E(X)=∑xipi. Substituting our calculated values, we get:
E(X)=(100)(31)+(50)(92)+(0)(274)+(−150)(278)
To solve this, we find a common denominator of 27:
E(X)=27900+27300+0−271200
Final Calculation
Combining the terms in the numerator:
E(X)=27900+300−1200=271200−1200=0
The result is 0. This means that, on average, you neither win nor lose money. In the world of probability, this is defined as a fair game.