Do Professional Poker Players 'Know When to Hold'Em'? Evidence Against Risk-Neutral Dynamic Optimization from Televised Poker Tournaments

30 Pages Posted: 2 Sep 2009 Last revised: 18 Sep 2009

See all articles by Erick Davidson

Erick Davidson

Allstate Insurance & Financial Services

Brian E. Roe

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Date Written: September 2009

Abstract

Professional poker players’ behavior in high-stakes, televised tournaments is significantly more conservative than that prescribed by risk-neutral models of dynamic optimization for decisions to call or fold after final ‘river’ bets. Had players adhered to a risk-neutral dynamically-optimal decision rule in these decisions they would have folded less than 10 percent of the hands played and experienced an increase in the share of chips at the table of 1.9 percent. In reality players folded significantly more often – more than 40 percent of the time – and experienced an average gain of only 1.3 percent. While the cost of this conservative play is not statistically significant, the players’ reticence is surprising given that the median player in our sample spends $10,000 to enter the poker tournament, plays for a cash prize pool of nearly $1 million and has substantial experience playing poker. Several explanations may explain the conservative decisions, including probability weighting and players’ overconfidence in being able to determine the strength of an opponent’s cards. The implication of professionals in a high-stakes competition deviating from risk-neutral decision making is explored.

Keywords: poker, risk, risk-neutral behavior, dynamic optimization

JEL Classification: C61, D81, L83

Suggested Citation

Davidson, Erick and Roe, Brian E., Do Professional Poker Players 'Know When to Hold'Em'? Evidence Against Risk-Neutral Dynamic Optimization from Televised Poker Tournaments (September 2009). Available at SSRN: https://ssrn.com/abstract=1465188 or http://dx.doi.org/10.2139/ssrn.1465188

Erick Davidson

Allstate Insurance & Financial Services ( email )

Chicago, IL

Brian E. Roe (Contact Author)

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States
614-688-5777 (Phone)

HOME PAGE: http://https://aede.osu.edu/our-people/brian-e-roe

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