Quick simple question I'm hoping someone can help me with.
According to loss aversion theory, typically a loss of $100 is the same as a gain of $250.
Assuming this is the case, would the following be a correct example of this (I haven't played poker for a while!).
Player A has $500 and has Jh Jd
Player B has $500 and has Ac Ks
There is $7 in the pot from blinds ($2 - $5 game).
Player B goes all in. Player A folds.
Mathematically, player A should call as he is getting even odds or thereabouts on his call and has a 57% chance of winning.
Assuming the above fact regarding loss aversion, would it be correct to say that Player A needs to win $1250 in order to make this call, and because he only stands to wn $1000 the way things stand, he folds and waits for another chance.
In your example JJ is a 57.254% favorite. Therefore, $1000 X .57254 = $572.54 - $500 = $72.54
So by calling the JJ has an expected profit of $72.54. Super easy call.
Loss aversion is just a psychological issue. In poker you make +ev plays no matter how thin that +ev play is. If you're too scared of losing money then either move down and play at a lower level or just stop because poker isn't for you.
Yes I realise all that but I'm writing a paper on how loss aversion can be exploited against weak live cash-game players. I understand that poker players make +ev calls but a lot of work into decision making under risk has discovered a large % of the population exhibit risk averseness in the domain of gains and risk loving in the domain of losses. I just wanted to know whether this was an appropriate exampe.
I know absolutely nothing about psychology, but don’t we play against a lot of people who have a kind of reverse loss aversion? The ones we call “fish”.
We treat folk who call pot sized bets chasing a non-nut flush draw like idiots, as it is so obviously a –EV move. We under-value the entertainment value that these people get from the adrenaline rush they experience when they hit. Like the people pumping buckets of quarters into slot machines until the bucket is empty.
They are not loss averse, they are mini-thrill seekers. And (unless they have a gambling problem) they cap their losses by limiting their 'entertainment budget'.
I think a better example to use on loss aversion would be on a river call. It is a lot easier for most people to make a pre-flop call and "see where it goes" than to make a thin call of a big bet with the possibility of "losing XX more." This is where loss aversion really kicks in, IMO. If a weak player is unsure if he's best or not, he'll often check the river down, rather than value bet, due to loss aversion. Similarly, if said player thinks they are 60% likely to have the best hand at showdown, they will often fold to a big bet that, if they have the range read at all right, should really be an easy call.
According to theory, and this has been well backed up by actual studies, EV framed as a loss is less likely to be accepted than the same EV framed as a win. For example, if you told someone you would give them $7.50 if they flipped a coin and it came out heads, everyone would, of course, accept. But if you told them to flip a coin, if they win you pay them $10, but if they lose, they pay you $5, many would decline. Strange but true.
My favorite example of loss aversion is also tied to another psych foible, escalation of commitment. It's called the twenty dollar bill auction. It's just like it sounds. Get out a twenty in a group of about 12 aggressive personalities, and auction it off to the highest bidder, but here's the catch. Whoever comes in second has to pay their bid too, and they get nothing for it. Once it gets past about $8, it's pretty much guaranteed to go well over $20.
You can just tell whoever is in second "Hey, you've already bid $7, and if you stop now, you lose $7, and he comes out $12 ahead." This gets you up to 20, just going back and forth. Then, once someone bids 20, you tell the other guy "Alright, if you bid $21, you recoup $20, instead of losing $19. Sure you don't come out ahead, but it's better than losing big." After about $25, it becomes all about screwing the other guy, and can get really out of control. It often gets over $50 before someone gives up.
Last edited by Garick; 04-15-2008 at 05:22 PM.
Reason: fixed typo
The related concept in poker is called "fold equity". The first aggressor is more likely to win or control the hand. This has nothing to do with loss aversion per say. A good player will simply play based on the expressed and implied odds, and on his reads. The example with JJ vs AK depends mostly on stack sizes, as does all pre-flop play. It would be stupid to call an all-in bet with a deep stack, unless you have AA.
If we are talking about players who don't know what they're doing, then loss aversion may come into play, otherwise it's a non-issue.
