Gambler's ruin

From ArticleWorld


Gambler’s ruin refers to the last loss of a gambler, making him, or her, unable to continue play. The term is also sometimes used to refer to the final, large loss that was intended to win back all that had been wagered thus far. In even more general terms, gambler’s ruin can mean the constantly decreasing expeted value of the gambler’s bank.


House advantage

When gambling in a casino, the odds are always slightly in favor of the house. There may be several reasons for this, but the end result is that the casino has a much smaller chance of experiencing gambler’s ruin, than the gambler does.

A casino usually has more money to ‘’play’’ with, thus the gambler has a much higher chance of experiencing gambler’s ruin. Odds are set in favor of the casino, plus casinos have risk management techniques in place, further assuring that the casino will come out ahead.

Gambler’s fallacy

Another common cause of gambler’s ruin is, the commonly believed gambler’s fallacy. Although they sound logical, they are common misconceptions.

  • A random event is more likely to occur because it has not happened for a period of time.
  • A random event is less likely to occur because it has nto happened for a period of time.
  • A random event is more likely to occur because it has happened recently.
  • A random event is less likely to occur because it had happened recently.

The key word here is ‘’random’’. Random events are just that, random. A good example of this is coin tossing. The odds of tossing heads are 50/50. The next time a person tosses that same coin, the odds of tossing heads are still 50/50. The phrase that sums it up best is: ‘’A coin doesn’t have a memory’’.