Quote:
Originally Posted by pablito_21
If the goal is that profit should be split equally between backer (more accurately: BAP'er) and horse, markup should be exactly 1, regardless of ROI. With any MU>1, an investor dollar will always have a lower ROI than a horse dollar.
For example if a 75% ROI player sells 50% of a 10k event @1.25 MU, the backer has an expected profit of (10k+10k*.75)*.5-10k*.5*1.25 = 2500 or an ROI of 2500/(10k*.5*1.25) = 40%. The horse OTOH has an expected profit of (10k+10k*.75)*.5-(10k-10k*.5*1.25) = 5000 or an ROI of 5000/3750 = 133%.
So either the goal is not to split profits equally, or I'm missing something?
you wouldnt be the first person to believe that tournaments should never be sold at markup. i dont think markup is an outright scam in general, but i do think that a) people way overestimate their ROI in tournaments and b) they use a markup that is too close to their ROI in general.
but, youre definitely right that the investor/horse will never have the same ROI with markup. but my formula was based on the old school "ill put up all the money and you get half the money cashed" type deals from rounders and from stu ungar's 97 world series. i wanted to find a way to evenly split the profits of the tournament if someone put up all the money for a horse based on his ROI in the tournament since a lot of good players are too broke to buy in to a series with much if any of their own $.
perhaps the backer putting up all of the buyin as the base formula isnt accurate though. maybe people shouldnt play tournaments if they cant afford to put up a certain amount of the buyin.
lets create a formula that splits the profits 2/3 to horse, 1/3 to backer (since as you said, it is impossible for them to have equal profits due to markup) based on the backer putting up 50*x of the buyin and the horse putting up 1-(50*x) of the buyin.
cashes for ROI+100
backer puts up 50X
horse puts up 100-50X
backer gets .5*(ROI+100)
horse gets .5*(ROI+100)
backer profits = .5*(ROI+100)-50X
horse profits = .5*(ROI+100)-(100-50X)
2*[.5*(ROI+100)-50X] = .5*(ROI+100)-(100-50X)
ROI+100-100X = .5*ROI+50-100+50X
.5*ROI+150 = 150X
X = (.5*ROI+150) / 150
ROI markup
10 1.0333
20 1.0667
30 1.1
50 1.1667
75 1.25
100 1.3333
200 1.667
unlike my original 50/50 profits with horse putting up 0% of the buyin example, this one allows for markup over 2:1 when the horse has an ROI >300. but at the low ROI, it has much lower markups than my first example.
we can come up with any number of these formulas/tables, but whats really going to turn the tables is when we can start estimating ROI for more than just HU tournaments. based on large sample sizes of many great online players we can deduce that ROIs in general are smaller than people think. Even a boss like munchenhb who has a million dollar score online doesnt have a 100% ROI on pokerstars.