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Optimal policies for playing variable wager HI-LO

Author

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  • J M Freeman

    (University of Manchester)

Abstract

Use of the HI-LO procedure by the gaming industry is ubiquitous—hence playing strategies of interest to gamblers and machine providers alike. Players’ tactics necessarily depend on goals being pursued and consistent with these, a variety of schemes ranging from the ‘aggressive’ to the ‘timid’ have evolved. Characteristics of the some of the best known of these—as far as they are applicable to a variable wager version of the HI-LO routine—are considered and contrasted. Of interest, results for a relatively risk-aversive scheme, played over a finite number of rounds are reconciled with those obtained asymptotically when maximizing capital growth is the priority.

Suggested Citation

  • J M Freeman, 2009. "Optimal policies for playing variable wager HI-LO," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(1), pages 79-83, January.
    • Handle: RePEc:pal:jorsoc:v:60:y:2009:i:1:d:10.1057_palgrave.jors.2602520
    DOI: 10.1057/palgrave.jors.2602520
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    References listed on IDEAS

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    1. J M Freeman, 2001. "Variable wager HI-LO: a stochastic dynamic programming analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(3), pages 352-357, March.
    2. Richard Bellman, 1957. "On a Dynamic Programming Approach to the Caterer Problem--I," Management Science, INFORMS, vol. 3(3), pages 270-278, April.
    3. Harry M. Markowitz, 2011. "Investment for the Long Run: New Evidence for an Old Rule," World Scientific Book Chapters, in: Leonard C MacLean & Edward O Thorp & William T Ziemba (ed.), THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 35, pages 495-508, World Scientific Publishing Co. Pte. Ltd..
    4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
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