Card Game: In-Between with a Standard Deck
In the card game "In-Between," played with a standard 52-card deck (ranks 2 through 10, J, Q, K, A with four suits each), two cards are drawn uniformly at random without replacement and revealed. You then choose a stake $x \in [0, W]$, where $W$ is your current bankroll. A third card is drawn from the remaining 50 cards:
- If the third card's rank is strictly between the two revealed ranks, you win $+x$.
- Otherwise (including ties with either boundary card), you lose $-x$.
Suppose the revealed ranks are 5 and Q (Queen).
- Compute the exact probability of winning, accounting for the two cards already removed.
- Express the expected value of one round as a function of $x$.
- State the risk-neutral optimal stake $x^{*}$ under the constraint $x \in [0, W]$.
Hints
- List the ranks strictly between 5 and Q. How many distinct ranks is that, and how many cards of each rank remain after the two revealed cards are removed?
- The third card is drawn uniformly from the 50 remaining cards. The win probability is (number of cards with winning ranks) / 50.
- Compute $E[\text{payoff}] = x \cdot P(\text{win}) - x \cdot P(\text{lose})$. If this is negative for all $x > 0$, the optimal stake is zero.
Worked Solution
How to Think About It: This is a conditional probability problem with a card-counting twist. You see a 5 and a Q, so the winning ranks are 6, 7, 8, 9, 10, J -- six distinct ranks. The question is how many of those cards remain in the 50-card deck after removing the two revealed cards. The ranks of the removed cards are 5 and Q, so none of the winning-rank cards have been removed. Once you have the probability, the EV and optimal stake follow immediately. Gut check: 6 winning ranks times 4 suits = 24 winning cards out of 50 remaining, so the win probability should be close to