8/12/2019 Marketing - Behavioral Economics - Poker and Human Brain - Aug 2010

http://slidepdf.com/reader/full/marketing-behavioral-economics-poker-and-human-brain-aug-2010 1/5

From: http://in.news.yahoo.com/columnist/amit_varma/18/poker-and-the-human-brain 

Poker and the Human Brain(Article on Behavioral Economics – useful for Marketing)

By Amit arma !in "ahoo #ews $ndia%

Au&ust 1'( ')1)

$ spend as much time playin& poker these days as $ once would spend

readin& and writin&( and my *riends sometimes ask me in +est what

literature and poker have in common. ,y reply is that both provide an

understandin& o* human nature. $ am not bein& *acetious.

ver since $ started playin& poker seriously( $ve held the view that poker

reveals the way our brain is wired. For eample( i* we carry a list o*

co&nitive biases with us to a poker session( and tick o** the ones we

witness in action( wed probably run throu&h the entire list by the end o* the

evenin&. $* were aware o* this( we can eploit these missteps in others --

and avoid them in our own play.

$n writin& this article( $ run the risk o* revealin& to my re&ular opponents a

*ew o* the tricks o* my trade. But *or the &reater &ood o* humanity( $ shall

lay those considerations aside. 0ere( then( are a *ew o* the co&nitive biases

that come into play on a poker table.

1. The unk!"ost #allac$. uppose you are in o**ice one day( and there is

much bu22 about a new 3apanese restaurant that has opened round the

corner. 45ets &o there *or lunch(4 you su&&est. All your re&ular cronies

concur( ecept one &irl who says( 4$ so want to come( but $ve &ot lunch*rom home( and it will be wasted.4 6hat is her only reason *or not comin&.

he doesnt want the packed lunch( and would vastly pre*er some una&i(

 but the unk 7ost Fallacy comes in the way.

8/12/2019 Marketing - Behavioral Economics - Poker and Human Brain - Aug 2010

http://slidepdf.com/reader/full/marketing-behavioral-economics-poker-and-human-brain-aug-2010 2/5

6he lo&ical way o* thinkin& about this is that the packed lunch is a sunk

cost -- and that i* she would otherwise pre*er to come to the new 3apanese

restaurant( then she should i&nore that sunk cost and come anyway. 6his is

the same mistake many stock market investors make. 6hey will buy a stock

*or( say( s 9). $t will slip to s ). $ts downward momentum will make itlo&ical to sell the stock( but they will reason that they have already lost s

1) on it( and will keep the stock in the hope o* recoverin& that money

somehow.

;oker players make the same error by throwin& in &ood money a*ter bad.

5et us say that you have pocket aces. "ou raise pre-*lop( a loose player

calls( and the *lop comes A<3 with two hearts. !"ou have none.% "ou have

a set( but slow-playin& is dan&erous because o* the *lush and strai&ht

 possibilities out there( so you make a pot-si2ed bet. "our opponent calls.

6he turn is a ten o* hearts. "ou make a bet two-thirds the si2e o* the pot(

and your opponent raises three times that. For any &ood player( unless you

have a read that the opponent is weak( this is an auto-*old. 6here are *our

cards to a strai&ht out there( three to a *lush( and i* your opponent has one

o* those( you have eactly ten outs to a *ull house or =uads( and the odds

dont +usti*y continuin&. But you say( "I have already spent so much money

on this pot. All that will be wasted. I can't leave now."  

>ood poker players know that the money already in the pot no lon&er

 belon&s to you( and that at every street you must make new evaluations

about how to proceed. But we are human( we have put money in the pot(

and its so hard to let it &o. $snt it?

Also see: Escalation of "ommitment.

%. The Endo&ment Effect. 6he above poker eample also illustrates the

ndowment **ect( which @ikipedia describes as 4a hypothesis that people

value a &ood or service more once their property ri&ht to it has been

established.4 $ts been much written about recently in a slew o* books about

 behavioural economics( and is a bias we o*ten see in poker when a player

*alls in love with his hand. $n the above eample( i* you are a spectator

watchin& the hand( it is obvious that the set o* aces should be *olded. $n the

8/12/2019 Marketing - Behavioral Economics - Poker and Human Brain - Aug 2010

http://slidepdf.com/reader/full/marketing-behavioral-economics-poker-and-human-brain-aug-2010 3/5

middle o* the action( thou&h( you ascribe more value to the hand than you

would i* some other player held it because its your  hand( and its so hard to

let it &o. Almost all re&ular players have *aced a situation where they play

A( *lop top pair-top kicker( but their bet on the *lop encounters a bi& raise

!or even an all-in% *rom a solid player who doesnt make cra2y moves. een*rom the outside( its time to consider *oldin&( because he could have a set

or two pair( but i* youre the &uy holdin& A( its so much harder to make

that dispassionate decision.

@hen $ started playin& poker( $d re*er to this as the tarting Hand Bias.

@eak players who hold 33 will o*ten be reluctant to *old to a bet *ollowin&

a *lop that has two overcards( and players who have A or A<s will *ind it

hard to &ive it away when they dont connect on the *lop. $t takes discipline

to overcome this bias and throw the hand away.

'. The ormalc$ Bias. @ikipedia de*ines this as 4an etreme mental

state4 that 4causes people to underestimate both the possibility o* a disaster

occurrin& and its possible e**ects.4 6his is related to the Availailit$

Heuristic( 4a phenomenon in which people predict the *re=uency o* an

event( or a proportion within a population( based on how easily an eample

can be brou&ht to mind.4

6wo eamples come to mind *rom my own play( a&ainst the same

opponent. $n one case( there were *our cards to a *lush on the board( with

no repeat cards( and $ had the ace o* that suit -- in other words( the nut

*lush. But the *our cards were connected with a &ap in between( and there

was the small chance that my opponent had the one card that made her a

strai&ht *lush that beat my hand. $ raised( she insta-reraised( and my read

was that she was very stron&. But $ thou&ht( 4#ah( strai&ht *lushes are so

rare( she cant possibly have one.4 $ did re*rain *rom re-reraisin& all-in(

thou&h( and merely called( to be shown the only hand that could beat mine.

$n another hand( $ had a *ull house and was reraised on the river. 6he only

hand that could be beat me was =uads( and my opponent( who is not

di**icult to read( showed immense stren&th. <uads are so rare( thou&h( that

$ i&nored my read and called. "ou &uessed it: Black wan event.

8/12/2019 Marketing - Behavioral Economics - Poker and Human Brain - Aug 2010

http://slidepdf.com/reader/full/marketing-behavioral-economics-poker-and-human-brain-aug-2010 4/5

@e see the same phenomenon when a player *lops a low *lush( and is =uite

happy to reraise all-in( assumin& that his hand is surely the best hand(

 because hey( he cant remember the last time two players *lopped a *lush.

6hats eactly the kind o* hand that busts players out o* tournaments.

*. The +ecenc$ Effect. 6his can be de*ined as 4the tendency to wei&h

recent events more than earlier events.4 @ikipedia &ives an eample: 4$* a

driver sees an e=ual total number o* red cars as blue cars durin& a lon&

 +ourney( but there happens to be a &lut o* red cars at the end o* the +ourney(

they are likely to conclude there were more red cars than blue cars

throu&hout the drive.4

$n poker( this can lead us astray a&ainst loose opponents. 5et us say that in

the last hal* an hour o* a session( you have seen a player raisin& with <o(

<6o( 9s( As and even C8o( all mar&inal !some outri&ht dubious% hands(

especially *rom early or middle position. o youre in a hand where hes

raised *rom early position( and you have A3s. "ou reraise( he calls. 6he

*lop is A'D rainbow. 0e checks( you bet the pot( he reraises by three times(

a move that recent evidence indicates he is capable o* makin& with

nothin&. @hat do you do?

$ve &one all-in a similar situation( only to be shown A. $ had *allen preyto the ecency **ect. $d made a move based on his recent play( =uite

i&norin& that even loose players &et &ood cards( and that my hand( because

o* the +ack kicker( was not =uite a monster.

6his is a bias that &ood players can eploit success*ully by chan&in& &ear

in the middle o* a session. ;lay loose *or a while( then suddenly &o ti&ht(

and you will &et paid o** on premium hands. ;lay ti&ht *or a bit( and then

make a blu**( and your opponents will &ive you more credit than is due and

*old.

Also see: The Primac$ Effect( 4the tendency to wei&h initial events more

than subse=uent events4. "ou o*ten see sharks eploit this by startin& a

session with some loose play( *or advertisin& e**ect( so they &et paid o** on

their premium hands later by players overvaluin& mar&inal holdin&s. $n

8/12/2019 Marketing - Behavioral Economics - Poker and Human Brain - Aug 2010

http://slidepdf.com/reader/full/marketing-behavioral-economics-poker-and-human-brain-aug-2010 5/5

other words( these sharks behave like *ish at the start o* a session( and later

&o chomp chomp chomp.

,. The "onfirmation Bias. 6his is the tendency to i&nore all in*ormation

that contradicts our preconceptions( and to treat all other in*ormation asevidence. ;eople who believe in astrolo&y( *or eample( will remember all

the instances when an astrolo&ers predictions came true( and i&nore all the

times they did not. Eitto homeopathy( and suchlike.

$ see this all the time with poker players. $ know players( *or eample( who

love to play hands like C8o and D( and will call bi& pre*lop raises with

them. 6hey have stories about how they once *lopped a strai&ht with D(

 beatin& two opponents who had AA and <<( and so on. Another player $

know has a &oo*y theory that i* two or three players have shown stren&th

with pre*lop raises and reraises( and he has two low cards( he should call

 because the other all surely have hi&h cards( so there is a &reater

 probability o* low cards hittin& the board. !>o *i&ure.%

;layers with belie*s like this remember the hand*ul o* times such play

works *or them( and i&nore all the other times when it doesnt. $* you play a

hand like 8Co( you will *lop two pair or better approimately one in D

hands. 6he rest o* the time( you are basically losin& money. @eak playersremember the one time they hit -- not the DD times they dont.

Also see: 6he emmelweis e*le. 

- - - -

6his is a sub+ect on which $ could &o on and on: theres no end to the co&nitive biases

one sees at a poker table( *rom 5oss Aversion to the 7hoice-upportive Bias to the

Gstrich **ect to the Belie* Bias and obvious ones like the Gptimism Bias( the Gver-7on*idence **ect and the #e&lect-o*-;robability Bias !duh%. 7heck out this list o*

co&nitive biases at @ikipedia: i* you are a poker player( you will surely reco&nise many

o* them.

For a while now( $ve been mullin& over the idea o* writin& a book about how the &ameo* poker reveals how the human brain is wired -- so this may not be the last you hear

*rom me on this sub+ect.

HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH