Stochastic ordering results on the duration of the gambler’s ruin game

Abstract

AbstractIn the classical gambler’s ruin problem, the gambler plays an adversary with initial capitals z and $a-z$ , respectively, where $a>0$ and $0< z < a$ are integers. At each round, the gambler wins or loses a dollar with probabilities p and $1-p$ . The game continues until one of the two players is ruined. For even a and $0<z\leq {a}/{2}$ , the family of distributions of the duration (total number of rounds) of the game indexed by $p \in [0,{\frac{1}{2}}]$ is shown to have monotone (increasing) likelihood ratio, while for ${a}/{2} \leq z<a$ , the family of distributions of the duration indexed by $p \in [{\frac{1}{2}}, 1]$ has monotone (decreasing) likelihood ratio. In particular, for $z={a}/{2}$ , in terms of the likelihood ratio order, the distribution of the duration is maximized over $p \in [0,1]$ by $p={\frac{1}{2}}$ . The case of odd a is also considered in terms of the usual stochastic order. Furthermore, as a limit, the first exit time of Brownian motion is briefly discussed.