I believe that situation only occurs when there are either no wins or no losses since in that circumstance the bare probabilities would guess that you are infinitely strong or infinitely weak. In that case it uses lower bounds and upper bounds to avoid an infinite rating. Once you have one loss and one win, the system looks for the rating that maximizes the probability that you have the observed results.

P.S. You should just read the ratings math page on the KGS website. It's quite readable, and from what I recall, you have the background for it (and I really don't).

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Occupy Babel!