A Probability Model of a Pyramid Scheme

Periodically, the pyramid or .chain letter. scheme is offered to Americans under the guise of a business dealership.Recently, the FTC ordered Glen Turner's .Dare to be Great. firm to repay 44 million dollars to participants.In order to demonstrate that the potential gains are misrepresented by promoters, a probability model of the pyramid scheme is developed.The major implications are that the vast majority of participants have less than a ten percent chance of recouping their initial investment when a small profit is achieved as soon as they recruit three people and that, on the average, half of the participants will recruit no one else and lose all their money.