Staying Ahead and Getting Even: Risk Attitudes of Experienced Poker Players

30 Pages Posted: 27 Jul 2015

See all articles by David Eil

David Eil

Interdisciplinary Center for Economic Science

Jaimie W. Lien

Shandong University - Center for Economic Research

Date Written: April 9, 2014

Abstract

Frequent online poker players with extensive experience calculating probabilities and expected values might be expected to behave as Expected Utility maximizers, in that small shocks to their wealth would not affect risk preferences (Rabin, 2000). By contrast, reference-dependent loss aversion (as in Prospect Theory) (Koszegi and Rabin, 2006; Kahneman and Tversky, 1979) predicts that risk aversion decreases as wealth moves away from the reference point in either direction. In terms of continuing to play, as well as a more aggressive playing style, we find strong evidence for the break-even effect, the increased pursuit of risk as a player is losing within a session. Players’ behavior also appears consistent with existing evidence on reference-dependent labor supply, in their tendency to reduce effort and risk-taking in response to being ahead. Our findings provide evidence for reference-dependent behavior in a flexible, high-skilled setting, under conditions of well-understood monetary risk.

Keywords: Decision-making under uncertainty, Reference-dependence, Experience, Risk, Poker

JEL Classification: D81

Suggested Citation

Eil, David and Lien, Jaimie W., Staying Ahead and Getting Even: Risk Attitudes of Experienced Poker Players (April 9, 2014). Games and Economic Behavior, Vol. 87, 2014, Available at SSRN: https://ssrn.com/abstract=2635494

David Eil

Interdisciplinary Center for Economic Science ( email )

400P Truland Building
George Mason University
Fairfax, VA 22030
United States

Jaimie W. Lien (Contact Author)

Shandong University - Center for Economic Research ( email )

Jinan, Shandong 250100
China

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