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Parrondo's Paradox is Not Paradoxical

Thomas K. Philips
Malbec Partners; OTA Asset Management

Andrew B. Feldman
OppenheimerFunds, Inc.

August 2004

Abstract:
Parrondo's paradox concerns two games that are played in an alternating sequence. An analysis of each game in isolation shows them both to be losing games (i.e., to have a negative expectation). However, when the two games are played in an alternating sequence, the resulting compound game is, paradoxically, a winning game with a positive expectation.

This paradox has aroused a great deal of interest in recent years, and a number of sophisticated resolutions of it have been published. It is the purpose of this article to show that the paradox is not paradoxical at all, and is easily resolved using elementary probability.

Keywords: Parrondo, paradox, resolution, probability

JEL Classifications: A19, A20, Z00

Working Paper Series

Date posted: August 25, 2004 ; Last revised: February 04, 2008

Suggested Citation

Philips, Thomas K. and Feldman, Andrew B., Parrondo's Paradox is Not Paradoxical (August 2004). Available at SSRN: http://ssrn.com/abstract=581521

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Contact Information

Thomas K. Philips (Contact Author) Malbec Partners ( email ) 200 Park Avenue, 46th Floor New York, NY 10166 United States (212) 271-4013 (Phone)
OTA Asset Management ( email ) 1 Manhattanville Road Purchase, NY 10577 United States (914) 460-4059 (Phone) (914) 694-5831 (Fax)
Andrew B. Feldman OppenheimerFunds, Inc. ( email ) 2 World Financial Center New York, NY 10085 United States

Abstract

References (5)

Date posted: August 25, 2004 ; Last revised: February 04, 2008

Suggested Citation

Contact Information

Thomas K. Philips (Contact Author)

Andrew B. Feldman