So Am I A NIt?

[Justin A]

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a) i think david would bet ((1.2 * .5) - .5) / 1.2 = 1/12th of his bankroll

http://en.wikipedia.org/wiki/Kelly_criterion

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This isn't a repeated game.

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Doesn't need to be.

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the Kelly criterion, or Kelly formula, is a formula used to maximize the long-term growth rate of repeated plays of a given gamble that has positive expected value.

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Short-term simply has to do with how much you value your money and how much "gamble" is in you, no formula will fit that.

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Utility formulas will fit that.

Saying Kelly doesn't apply to one time only situations is like saying you shouldn't use EV calcs to figure out whether to take a one time only bet.

That being said, Kelly won't necessarily be best if your utility from of differing bankroll sizes does not work on a linear scale, or if you gain utility from gambling more.