re: Poker & Big Pot Winner Psychology (blog X-post)
This is really about basic human psychology. From this (http://twoplustwo.com/magazine/current/mccauley0907.html) super interesting article:
"PROBLEM I: Imagine the US is preparing for the outbreak of an Asian disease, expected to kill 600 people:
- If program A is adopted, 200 people will be saved
- If program B is adopted, there is one third probability that 600 people will be saved and two thirds probability that no people will be saved
Think for a moment about which program you would prefer.
When research participants are asked this question, 72% prefer program A and 28% prefer program B. Since the expected-value of program A and program B are equivalent, participants who choose program A can be described as risk-averse
, while participants who choose program B are risk-seeking
. Thus, on average people seem to be risk-averse
by a 3:1 margin for this particular problem. There is nothing wrong with any of this -- yet
. Risk-seeking is not inherently more rational or less rational than risk-aversion.
Consider a different problem:
PROBLEM II: Imagine the US is preparing for the outbreak of an Asian disease, expected to kill 600 people:
- If program C is adopted, 400 people will die
- If program D is adopted, there is one third probability that nobody will die and two thirds probability that 600 people will die
Faced with this problem, 22% of research participants prefer program C and 78% prefer program D. Thus, in problem II research participants seem to be risk-seeking
by a 3:1 margin. Take a look back. Program A is structurally identical
to Program C, just as program B is structurally identical to program D. Only the framing of the programs is different (i.e. stating that 400 of 600 will die rather than stating that 200 of 600 will be saved). So why do the vast majority opt to gamble in the second problem but not the first?
According to Prospect Theory, as people regard themselves to have made gains, they tend to be less willing to risk losing those gains in exchange for further gains (i.e. they become more risk-averse). This is because subsequent gains bring less satisfaction than previous gains. Conversely, as people regard themselves to have accrued losses, they tend to be more willing to risk further losses in exchange for the opportunity to have lost less (i.e. they become more risk-seeking). This is because further losses don't hurt as much as the initial losses did. In many research studies, the effect of losses on decisions is about twice as strong as the effect of gains."
[TB, you are against the norm and the standard "they are tight when they are busy (stacking)" tell motto]