Problem bank

Problem 177 of 333MediumProbabilityP177

St. Petersburg against a finite casino

  1. A fair coin is flipped until the first tails, which comes on flip kk. The casino promises 2k2^k dollars, but it only has $1 billion, so it pays min⁡(2k,109)\min(2^k, 10^9) dollars. What is the fair price of one play? How much does it rise if the casino has $1 trillion instead?