I was reading about the gamblers ruin problem here, and they approach it with a difference equation.
The issue is that when I plug $p=\frac 1 2$, I get that the probability that the gambler will ever reach his goal becomes zero which is clearly not true.
Here is how I'm getting that:
The gambler starts with $a$ dollars and aims to get to $c$ dollars. He tosses a coin that has a probability $p$ of heads until he reaches either $c$ or $0$. The difference equation is given by:
$$s_c(a) = p s_c(a+1)+ (1-p)s_c(a-1)$$
Then, assuming $s_c(a) = z^n$ we get the characteristic polynomial:
$$pz^2-z+(1-p) = 0$$
We get the two solutions: $z = 1$, $z=\frac 1 p -1$.
So the general solution becomes:
$$s_c(a) = c_1 + c_2\left(\frac 1 p – 1\right)^a$$
Then we plug in the boundary conditions, one of which is $s_c(0)=0$.
Now here is where things get weird. If we plug $p =\frac 1 2$, the equation becomes:
$$s_c(a) = c_1$$
And since we know $s_c(0)=0$, this means $c_1 = 0$. So this implies that for $p=\frac 1 2$, $s_c(a)=0$. But this is obviously not true. What am I missing here?
Best Answer
What you are missing is that if $p=\frac{1}{2}$, then the two roots of the characteristic polynomial coincide. The general solution becomes $$s_c(n)=c_11^n + c_2n1^n=c_1+nc_2$$