Suppose a firm owner woke up every morning and rolled a 6 sided die (singular of dice) and opened her store at 9 am if it came up 1 or 2 but opened at 10 am otherwise. This would be an example of a mixed strategy in which she opens at 9 am with probability 1/3 and opens at 10 am with probability 2/3.

   To understand mixed strategies we need to understand expected returns. Suppose I bet you $1 that if I draw a card from a well shuffled standard 52 card deck it will be a heart or a diamond. If all is fair I would win this bet about half the time and lose it about half the time. What is my expected payoff from this bet?

   If half the time I would win $1 and half the time I would loss $1 then my expected payoff is:
E = .5(1) + .5(-1) = 0.
In other words, my expected winnings are zero since I my chances of winning and loosing are equal as are the amounts I would win or lose.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved