“Advantage players” use card counting and other techniques to boost their winnings in casinos. Card counting is the practice of memorizing which cards have been dealt so as to predict better which cards may be dealt next. Other techniques include statistical analysis or simulation of the game beforehand, exploitation of weaknesses in shuffling procedures, and so forth. A recent New York Times Magazine article tells the story in detail.
Advantage playing is usually legal, even though casinos frequently eject advantage players when they can be identified. But is it ethical? Is it cheating? Is it fair?
Essentially the same question arises in a more serious context. Professional financiers are “advantage players” in the investment markets, relative to ordinary investors. Their ability to analyze data and construct optimal portfolios gives them an edge. Is this ethical? Is it cheating? Is it fair?
Contributed by a finance professor.
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