Geometric Convergence of Algorithms in Gambling Theory

Published Online:https://doi.org/10.1287/moor.23.3.568

In the Dubins and Savage theory of gambling, backward induction provides an algorithm for calculating the optimal return when the gambling problem is leavable. A relatively new algorithm works for nonleavable problems. We show that these algorithms converge geometrically fast for finite gambling problems. Our argument also provides a much simpler proof of convergence for the nonleavable case.

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