CON101 7, Sepetember,2021

Assignment 4b: Optimal Strategy Problem

Due Date: 21, September,2021

Problem Statement:

Consider an instance of the prophet problem involving 3 independent random variables, X_1, X_2, X_3
distributed as follows.

X_1: Uniform in {1,4,16,64}

X_2: Uniform in {1,3,9,27}

X_3: Uniform in {1,2,4,8}

As described in the talk, the values of these random variables are seen in the order X_1, X_2, X_3, and, as
soon as a value is seen, you need to either pick it or throw it away. The only change in rules is that you are
allowed to pick 2 of the 3 values (you are selling 2 identical items instead of 1).

Find out the strategy that maximizes the expectation of the sum of the values selected. Compute the
expected payoff of your strategy. Note that your decision to accept or reject a value could depend on
whether you have accepted 0, 1, or 2 values already.

Submission Instructions:

• Write your explanation on LaTeX document.

• Submit pdf (LaTeX Doc) file on both Turnitin and Moodle.
• The pdf file uploaded should have the following naming convention <Entry Number>-
<Name>-<Assignment Title>.