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Stochastic ordering results on the duration of the gambler’s ruin game

Published online by Cambridge University Press:  06 October 2023

Shoou-Ren Hsiau*
Affiliation:
National Changhua University of Education
Yi-Ching Yao*
Affiliation:
Academia Sinica
*
*Postal address: Department of Mathematics, National Changhua University of Education, No. 1, Jin-De Road, Changhua 500, Taiwan, R.O.C. Email: srhsiau@cc.ncue.edu.tw
**Postal address: Institute of Statistical Science, Academia Sinica, No. 128 Academia Road, Section 2, Nankang, Taipei 11529, Taiwan, R.O.C. Email: yao@stat.sinica.edu.tw
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Abstract

In the classical gambler’s ruin problem, the gambler plays an adversary with initial capitals z and $a-z$, respectively, where $a>0$ and $0< z < a$ are integers. At each round, the gambler wins or loses a dollar with probabilities p and $1-p$. The game continues until one of the two players is ruined. For even a and $0<z\leq {a}/{2}$, the family of distributions of the duration (total number of rounds) of the game indexed by $p \in [0,{\frac{1}{2}}]$ is shown to have monotone (increasing) likelihood ratio, while for ${a}/{2} \leq z<a$, the family of distributions of the duration indexed by $p \in [{\frac{1}{2}}, 1]$ has monotone (decreasing) likelihood ratio. In particular, for $z={a}/{2}$, in terms of the likelihood ratio order, the distribution of the duration is maximized over $p \in [0,1]$ by $p={\frac{1}{2}}$. The case of odd a is also considered in terms of the usual stochastic order. Furthermore, as a limit, the first exit time of Brownian motion is briefly discussed.

Information

Type
Original Article
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of Applied Probability Trust