[Math] Coin flips and prediction – Is this a paradox

independenceparadoxesprobability

Let's say a coin is given to you which is shown to have two sides (head and tail). I threw the coin 10 times and I got the sequence HHHHHHHHHH (all heads). Now, I am about to throw it the eleventh time. You lose a large bet if you predict the next toss wrongly. How will you predict the outcome of next toss?

Here are some of my answers:

  1. It is rare to see 10 heads together unless the coin is biased. Hence, the probability that the coin is biased (the hyperparameter, theta) is very high. So, I should bet that the next outcome will also be a head.
  2. 10 flips are too small a number to conclude that the coin is biased. Getting 11 heads is extremely rare and hence I must bet on a tail for eleventh toss.
  3. Coin flips are IID and hence it does not depend on the previous tosses. You can bet on anything and your chances of winning is the same.

Am extremely confused on which of these is a good answer if any of them is a good answer at all. What do you think?

Best Answer

Well, I'd say the coin is biased or not. If it isn't biased, the probability of each outcome (H or T) is 1/2 (disregarding the possibility of the coin landing on its side and remaining in that position). In this case it doesn't matter what you choose.

If the coin is biased, it'll be biased towards H or T. Considering the outcome of the first ten flips, the probability of the coin being biased towards T is smaller than it being biased towards H. Choosing H will be the better choice in this case.

In short: choose H.