POKER: THE MORE YOU WIN, THE MORE YOU LOSE

15 January 2010

Cornell study may seem counter-intuitive, but it is in line with behavioural economics

Research by a sociology doctoral student at the prestigious Cornell college in the United States is making the headlines, mainly because its conclusions appear to present a dichotomy: The more hands players win, the less money they're likely to collect, especially when it comes to novice players.

But research report author Kyl Siler says this is only because it presents a conclusion that at first hand appears to be counter-intuitive, but in fact coincides with the findings of other behavioural studies.

Siler, whose study analysed 27 million online poker hands, explains that the multiple wins are likely for small stakes, and the more you play, the more likely you will eventually be to take a hammering by occasional but significant losses.

This finding, Siler said, "coincides with observations in behavioural economics that people overweigh their frequent small gains vis-à-vis occasional large losses, and vice versa."

In other words, players feel positively reinforced by their streak of wins but have difficulty doing the "cognitive accounting" to fully understand and accept how their occasional large losses offset their gains.

The study was published online in December in the Journal of Gambling Studies and will be published in a forthcoming print edition later this year. Siler used the software PokerTracker to upload and analyse small-stakes, medium-stakes and high-stakes hands of No-Limit Texas Hold'em with six seats at the table.

The game has simple rules and "any single hand can involve players risking their entire stack of chips," Siler said.

Siler's research also found that for small-stakes players, small pairs (from twos to sevens) were actually more valuable than medium pairs (eights through jacks).

"This is because small pairs have a less ambiguous value, and medium pairs are better hands but have more ambiguous values that small-stakes players apparently have trouble understanding," said Siler, a long-time poker player himself.

The research project not only examined the "strategic demography" of poker at different levels of stakes and the various payoffs associated with different strategies at varying levels of play, but also "...speaks to how humans handle risk and uncertainty," said Siler, whose look at online poker combines aspects of behavioural economics, economic sociology and social science theory.

"Riskiness may be profitable, especially in higher-stakes games, but it also increases the variance and uncertainty in payoffs. Living one's life, calibrating strategies and managing one's bankroll are particularly challenging when enduring wild and erratic swings in short-term luck and results."

Siler concluded that in online poker: "The biggest opponent for many players is themselves, given the challenges of optimizing one's mindset and strategies, both in the card game and the meta-games of psychology, rationality and socioeconomic arbitrage which hover beneath it."

Online Casino News Courtesy of Infopowa

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