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The four-digit number game is a popular game of chance played in
South East
Asia. The players in this game choose a 4-digit number and place their bets
on it. In this paper, motivated by a real application, we study the design
of a good control mechanism for
managing the bets in this game. Our objective is to design a control
mechanism to decide whether the bets should be accepted or rejected.
We
propose a non-linear optimization model for this problem and provide the
mathematical justification for the control mechanism used by several
operators in this region. We also suggest a simple improved control
mechanism. Using data provided by a company in the region, we show that our
control mechanism can accept more money per draw, while the risk exposure of
the proposed mechanism can be
considerably smaller than the current system.
This is joint work with Leong Siew-Meng (NUS).
