Parrondo’s paradox

Abstract

We introduce Parrondo’s paradox that involves games of chance. We consider two fair gambling games, A and B, both of which can be made to have a losing expectation by changing a biasing parameter ε . When the two games are played in any alternating order, a winning expectation is produced, even though A and B are now losing games when played individually. This strikingly counter-intuitive result is a consequence of discrete-time Markov chains and we develop a heuristic explanation of the phenomenon in terms of a Brownian ratchet model. As well as having possible applications in electronic signal processing, we suggest important applications in a wide range of physical processes, biological models, genetic models and sociological models. Its impact on stock market models is also an interesting open question. © 1999 Institute of Mathematical Statistics.