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
Date Written: September 2009
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: Suggested Citation