Journal article

Path-Dependent and Randomized Strategies in Barberis’ Casino Gambling Model

Abstract:: We consider the dynamic casino gambling model initially proposed by Barberis (2012) and study the optimal stopping strategy of a pre-committing gambler with cumulative prospect theory (CPT) preferences. We illustrate how the strategies computed in Barberis (2012) can be strictly improved by reviewing the betting history or by tossing an independent coin, and we explain that the improvement generated by using randomized strategies results from the lack of quasi-convexity of CPT preferences. Moreover, we show that any path-dependent strategy is equivalent to a randomization of path-independent strategies.

Publication status:: Published

Peer review status:: Peer reviewed

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APA Style

He, X., Hu, S., Obloj, J., & Zhou, X. (2016). Path-Dependent and Randomized Strategies in Barberis’ Casino Gambling Model. Operations Research, 65(1), 97–103.

MLA Style

He, X, et al. “Path-Dependent and Randomized Strategies in Barberis’ Casino Gambling Model.” Operations Research, vol. 65, no. 1, 2016, pp. 97–103.

Chicago Style

He, X, S Hu, J Obloj, and X Zhou. 2016. “Path-Dependent and Randomized Strategies in Barberis’ Casino Gambling Model.” Operations Research 65 (1): 97–103.
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Files:: SSRN-id2534936.pdf

(Preview, Accepted manuscript, pdf, 440.4KB, Terms of use)

Publisher copy:: 10.1287/opre.2016.1545

Authors

+ He, X More by this author

Role:: Author

+ Hu, S More by this author

Role:: Author

+ Obloj, J More by this author

Institution:: University of Oxford
Division:: MPLS
Department:: Mathematical Institute
Role:: Author

+ Zhou, X More by this author

Role:: Author

+ Oxford-Man Institute More from this funder

Funding agency for:: Obloj, J; Zhou, X
Grant:: FP7/2007-2013) no. 33542

+ European Research Council More from this funder

Funding agency for:: Obloj, J
Grant:: FP7/2007-2013) no. 33542

+ St John’s College, Oxford More from this funder

Funding agency for:: Obloj, J
Grant:: FP7/2007-2013) no. 33542

Publisher:: INFORMS
Journal:: Operations Research More from this journal
Volume:: 65
Issue:: 1
Pages:: 97 - 103
Publication date:: 2016-11-01
Acceptance date:: 2016-06-03
DOI:: 10.1287/opre.2016.1545
EISSN:: 1526-5463
ISSN:: 0030-364X

Keywords:: quasi-convexity

casino gambling

optimal stopping

randomized strategies

cumulative prospect theory

path-dependence
Pubs id:: pubs:656543
UUID:: uuid:6e50d4d5-192f-44d1-8692-95d4167790dc
Local pid:: pubs:656543
Source identifiers:: 656543
Deposit date:: 2016-11-02
ARK identifier:: ark:/29072/ora_6e50d4d5192f44d1869295d4167790dc

Terms of use

Copyright holder:: INFORMS
Copyright date:: 2016
Notes:: Copyright © 2016, INFORMS. This is the accepted manuscript version of the article. The final version is available online from INFORMS at: [10.1287/opre.2016.1545]

Licence:: Terms and Conditions of Use for Oxford University Research Archive

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