Expected Value PDF
Expected Value PDF
Blake Thornton
Craps is a gambling game found in most casinos based on rolling two six sided dice. Most players
who walk into a casino and try to play craps for the first time are overwhelmed by all the possible
bets. The goal here is to understand what these bets are and how the casino makes money.
Thus, you expect to get $1.17 back every time you play, making a cool $0.17 profit.
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Another way to ask this very same question would be, “how much is the fair price for this
game?” (The answer is, of course, $1.17.)
Another way to answer this question is to use the following chart
Roll Profit
6 $3
5 $1
4 $0
3 $ -1
2 $ -1
1 $ -1
Computing expected value:
1 1 1 1 1 1 1
E(X) = 3+ 1+ 0+ (−1) + (−1) + (−1) = ≈ 0.167
6 6 6 6 6 6 6
Again, you see that you expect about a $0.17 profit.
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2 Probabilities Versus Odds
Lets explore this with a roll of a dice. If you roll a dice 600 times, you would expect to see the
number one, 100 times:
2.1 Exercises
If given odds, compute the probability. If given a probability, compute the odds.
Question 1. Compute the probabilities for the sum of two rolled dice.
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Solution:
To determine the probability of rolling a number you count the number of ways to roll that
number and divide by 36.
4 Craps
In the game of craps there are a wide range of possible bets that one can make. There are single
roll bets, line bets and more. The player places these bets by putting his money (gambling chips)
in the appropriate place on the craps table, see Figure 1.
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4.1 Single roll bets
These bets are the easiest to understand. In a single roll bet the player is betting on a certain
outcome in a single roll.
Solution: Here is the expected value of one dollar bet on the field.
7 1 17
E(X) =2 · +3· = ≈ 0.944
18 18 18
In other words, in the long run $1 bet on the field will expect to pay the player $0.944. As we will
see, this is better than some bets but it is not good enough.
4.1.2 C and E
These are the craps and yo bets. In the game of craps a roll of craps is a roll of a 2, 3 or 12. A
roll of eleven is also called a yo. (At the craps table you will hear people calling for a “lucky-yo,”
meaning they want an eleven rolled.)
A player can place a one-time bet on any of these numbers and the payoffs are printed on the
craps table.
Notice that the odds paid are printed on the table. So, for example, the odds paid for any seven
is 4 to 1. Thus, if you put $1 down and a seven is rolled this will pay you $4 plus your original bet
(thus you will walk away having “earned” $4).
Note that in this table we introduced the column “Actual Odds.” This is the odds that the
casino should pay in order to be completely fair. In other words, if the casino paid these odds then
the expected value of a dollar bet would be a dollar.
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4.2 The pass line
Line bets are the best example of a multi-roll bet. This means that the bet actually lasts several
rolls—the player does not generally win or lose immediately.
Roll Description
3 Come out roll, craps. Player loses $1 and places another $1 on pass line.
7 Come out roll, lucky 7. Player is paid $1 and keep his $1 on the pass line.
11 Come out roll, Yo 11. Player is paid $1 and keep his $1 on the pass line.
4 Come out roll, point of 4 established. No payouts
6 Nothing happens, point is 4.
9 Nothing happens, point is 4.
12 Nothing happens, point is 4.
4 Point is made. Player is paid $1 and keeps his $1 on the pass line.
6 Come out roll, point of 6 is established.
3 Nothing happens, point is 6.
7 7-out. Player loses $1 bet.
Once a point has been established the player wants that point to be rolled and loses if a 7 is
rolled. Just looking at probabilities, it is clear that the player is more likely to win if the point is 6
or 8 and less likely to win if the point is 4 or 10.
Lets compute some expected values. The key in computing the probabilities involved is first
understanding that a pass line bet begins on the come out roll and ends when either the player is
paid or when the player loses. Theoretically, this could take forever (nothing guarantees that the
point or a 7 will ever be rolled). In any case, for the come-out roll, we can say the following:
2
P (7 or 11) = (Player wins)
9
1
P (2, 3 or 12) = (Player craps out, loses)
9
2
P (4, 5, 6, 8, 9, 10) = (A point is established)
3
Once a point is established, we want to compute the probability of that point coming up again
before a seven. This will, of course, depend on what that point is.
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Lets do the computation for the point 4 (the calculation if the point was 10 is identical). The
player will win if a 4 rolls before a seven. So, a winning sequence of rolls could look like
So, the following are the probabilities of winning after a point of 4 has been established.
1
P (4 on roll 1) =
12
3 1
P (4 on roll 2, no 7) =P (not a 4 or 7) P (4) = ·
4 12
2
3 1
P (4 on roll 3) =P (not a 4 or 7) P (4 on roll 2, no 7) = ·
4 12
Putting all this together, the probability of winning after a point of 4 has been established is a
geometric series:
Similarly, we can compute the probability of winning other points. (And, included are the
“points” of 2,3 and 12, which are not really points because they are craps.)
1
P (2 before 7) =P (12 before 7) =
7
1
P (3 before 7) =P (11 before 7) =
4
1
P (4 before 7) =P (10 before 7) =
3
2
P (5 before 7) =P (9 before 7) =
5
5
P (6 before 7) =P (8 before 7) =
11
We can now compute our probabilities of winning
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Event Probability
2
Win with a 7 or 11 on come-out roll 9
1
Lose with 2,3,12 on come-out roll 9
1 1 1
Establish point 4 and win 12 3
= 36
1 2 1
Establish point 4 and lose 12 3
= 18
1 2 2
Establish point 5 and win 9 5
= 45
1 3 1
Establish point 5 and lose 9 5
= 15
5 5 25
Establish point 6 and win 36 11
= 396
5 6 5
Establish point 6 and lose 36 11
= 66
5 5 25
Establish point 8 and win 36 11
= 396
5 6 5
Establish point 8 and lose 36 11
= 66
1 2 2
Establish point 9 and win 9 5
= 45
1 3 1
Establish point 9 and lose 9 5
= 15
1 1 1
Establish point 10 and win 12 3
= 36
1 2 1
Establish point 10 and lose 12 3
= 18
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Event Probability
2
Lose with a 7 or 11 on come-out roll 9
1
Win with 2,3 on come-out roll 12
1
Push with 12 on come-out roll 36
1 1 1
Establish point 4 and lose 12 3
= 36
1 2 1
Establish point 4 and win 12 3
= 18
1 2 2
Establish point 5 and lose 9 5
= 45
1 3 1
Establish point 5 and win 9 5
= 15
5 5 25
Establish point 6 and lose 36 11
= 396
5 6 5
Establish point 6 and win 36 11
= 66
5 5 25
Establish point 8 and lose 36 11
= 396
5 6 5
Establish point 8 and win 36 11
= 66
1 2 2
Establish point 9 and lose 9 5
= 45
1 3 1
Establish point 9 and win 9 5
= 15
1 1 1
Establish point 10 and lose 12 3
= 36
1 2 1
Establish point 10 and win 12 3
= 18
6 Crapless Craps
There is a variation of craps (discovered by the author on a recent trip to a casino) called “Crappless
Craps” or “No More Craps, Craps.” What this means is that the craps and yo are all done away
with on the come out roll. Instead, the 2,3,11,and 12 are valid points just like the 4,5,6,8,9 and 10.
The odds bets for these are also paid off at true odds. This looks like a good thing because there
are less ways to lose on the come-out roll.
We now compute some probabilities and expected values.
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Event Probability
1
Win with 7 on come-out roll 6
1 1 1
Establish point 2 and win 36 7
= 252
1 6 1
Establish point 2 and lose 36 7
= 42
1 1 1
Establish point 3 and win 18 4
= 72
1 3 1
Establish point 3 and lose 18 4
= 24
1 1 1
Establish point 4 and win 12 3
= 36
1 2 1
Establish point 4 and lose 12 3
= 18
1 2 2
Establish point 5 and win 9 5
= 45
1 3 1
Establish point 5 and lose 9 5
= 15
5 5 25
Establish point 6 and win 36 11
= 396
5 6 5
Establish point 6 and lose 36 11
= 66
5 5 25
Establish point 8 and win 36 11
= 396
5 6 5
Establish point 8 and lose 36 11
= 66
1 2 2
Establish point 9 and win 9 5
= 45
1 3 1
Establish point 9 and lose 9 5
= 15
1 1 1
Establish point 10 and win 12 3
= 36
1 2 1
Establish point 10 and lose 12 3
= 18
1 1 1
Establish point 11 and win 18 4
= 72
1 3 1
Establish point 11 and lose 18 4
= 24
1 1 1
Establish point 12 and win 36 7
= 252
1 6 1
Establish point 12 and lose 36 7
= 42
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7.1 Pass line player
Basically, this means that if you are betting on the pass line then every hour you will place around
17 bets. If you are making $100 bets then this means you will have placed $100 on the table 17
times and on you will receive $98.59 back from these bets. In other words, in an hour you will have
lost only about $23.97.
So, if the point is 4 and that point is hit then the player would have $1 on the pass-line and $10
for odds. The player would be paid $1 for his pass-line bet and $20 for his odds bet.
How do you compute the house advantage now?
• http://casinogambling.about.com/cs/craps/a/5count.htm
• http://homepage.ntlworld.com/dice-play/CrapsSystems.htm
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As one Internet site said, “There are NO winning systems for Craps that work!” It is instructive
to see if you can figure out what is wrong with these systems.
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7.5.5 The Place Betting System
A big time gamblers system which has even deceived some Craps operators. You place
the maximum limit (although it can be less) on all of the six place bets: 4, 5, 6, 8, 9
and 10. If the limit is $200 then this makes a total of $1,200. As soon as one of these
bets is won you collect on it and call off the remaining five place number bets. Yes,
most casinos allow you to call off place number bets at any time. The theory is that
the bettor has six numbers against the house’s one, the 7. There are 24 ways to make
the place numbers and only 6 ways to make a 7 so the odds are worked out as 4 to 1 in
favor of the gambler with the system.
Question 5. If you flip a coin twice, what the probability that it will come up heads each time?
What if you flip the coin 3 times? n times?
Question 6. Suppose we play a game in which you flip a coin until a heads comes up for the first
time. What is the probability that the first heads will come up on the first flip? Second flip? Third
flip? What about the nth flip?
Question 7. Play a game where you flip a coin until you get a heads. If the first heads comes up
on the k th flip, then you win 2k dollars. So if you get H on the first try, you win $2. If you get T
and then H, you win $4. If you get TTTTH, you win $32.
What is the least amount of money a player can win in this game? What is the most? How
much would you be willing to pay to play this game? What is a fair amount to pay to play this
game?
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