Judgments under competition and uncertainty : empirical evidence from online-poker

Playing poker has many aspects in common with the making of business decisions. Agents act in a strategically rich, dynamic environment, where they are repeatedly facing competition under uncertain prospects. Their main goal is to maximize their resources. However simple this goal is put down, it is difficult to fulfill. As vast and rich research has shown, heuristics and biases affect human decision-making. This work adds to these findings by providing empirical evidence for behavioral patterns in decision-making in a competitive game with uncertainty. The poker environment offers a promising background to analyze judgments. Poker has a long history, in which it interacted mostly with western culture. It is a game reflecting social structures and is full of psychological momentum. Its mathematical features allow for applications of normative approaches from decision theory. Furthermore, we show why playing poker is similar to trading in a financial market. After discussing how concepts of rational decisions can be applied in situations of risk and uncertainty in the game, hypotheses on psychological influences on actual behavior are deduced with reference to behavioral finance. Data from actually played games of online poker, covering several millions of separate decisions and several thousand players with an extensive record, provides our testbed. We use the IRC poker database, available for free download at http://games.cs.ualberta.ca/poker/IRC/IRCdata. Tests for psychological effects are performed in five areas:- Distortions in the evaluation of probabilities (long-shot bias) and outcomes (valuation of outcomes relative to a reference point. - The use of information heuristics, i.e. the influence of availability, the gambler's fallacy in judging card randomization and a belief in winning streaks (the hot hand).- Improving play by learning in a dynamic environment, from first steps to faster reaction times and general adjustments in risk-taking behavior. - The influence of emotions on decision-making with the special cases of boredom, elation, and distress.- Judgments of skill as they are affected by an illusion of control and overconfidence.Although the present finding may already be used to improve poker play or other decision-making, a perspective on further opportunities for research from the richness of the game concludes the dissertation.