Page 26 - December 2013 • Southern California Gaming Guide

Bob Dancer: Video Poker
TAhe Endowment Effect in Video Poker
ssume you were told that next Saturday night ush (worth $50 guaranteed cash money) or to just hold you would win $1,000 in a casino drawing. the deuces and hope for the best. e EV (expected value) Pretty sweet, yes? Most of us would see that as of holding the deuces in this position is worth $72.41. (If
improving our score. It is at least possible to devise a scenario where taking the straight ush makes sense: Perhaps you need $40 to buy some very important medicine and now that you have it, you’re going to cash out and rush to the pharmacy.
Now let’s look at being dealt Q♥ J♥ 4♠ 5♠ 6♠. In my classes, I tell players when they are trying to decide between the hearts and the spades to pick the one with the higher EV. I actually simplify it more than that and tell them to go for the one that appears higher on the strategy chart.
Where the dealt three deuces and the second hand are di erent is in terms of endowment. With the three deuces, your endowment is $50 (the dealt straight ush), although you are guaranteed at least $20 (if the cards don’t connect, you still have a 4-of-a-kind). With the second hand, regardless of whether you hold the hearts or spades, your endowment is $0 and you are guaranteed nothing. With the second starting hand in NSU Deuces Wild, about 80% of the time you are going to end up with nothing, regardless whether you hold the hearts or the spades. When there is no endowment, going for the highest EV is always a very good strategic move.
But when there is an endowment in video poker (speci cally some sort of dealt hand), going for the highest EV may not always work for everyone. “Knowledgeable” players, including me, have often derided others who take the guaranteed lesser amount rather than the higher amount that has some degree of gamble embedded in it.
Believe it or not, I’ve gradually become less critical of those who choose di erently from me. I’m still going to teach and play assuming that my endowment doesn’t matter, but I’m not going to berate you if you “chicken out” and take the guaranteed lesser win. For some people, losing any part of their endowment can be emotionally devastating. For those people, feelings while playing video poker do matter.
Listen to Bob’s radio show Gambling With An Edge, on Thursday evenings 7 to 8 p.m. Paci c Time on radio station 1230 AM in Las Vegas online at klav1230am.com. Dancer’s products may be ordered at bobdancer.com or at 1-800-244-2224 Monday through Friday from 9 a.m. to 5 p.m. Paci c Time.
an improvement over our status quo and be pleased. Now let’s change it a bit. Assume you are at that Saturday
night drawing and ten names are called by the casino, including yours. Nine out of ten of those get $1,000 and one getsa$41,000BMW.Youarecalledearlyinthedrawing.By the time all ten people are selected and the rules have been read to everyone, you’ve had fteen minutes to think about what color you want your new car to be. When the nal drawing takes place, somebody else wins the automobile and you’re stuck with the lousy $1,000. How pleased are you then?
It is typical to be pretty disappointed in this scenario. No matter how many other people tell you,“Hey. You did ne. I didn’t get called at all and I had twice as many tickets as you did,” most of us would not be too pleased.
In our rst example, we were pleased at the thought of winning $1,000. In the second example, when it actually came to winning the $1,000, we were disappointed. What was so di erent in those two cases?
What was di erent is something called an endowment. When you were thinking about the problem at the start, you weren’t guaranteed anything. You looked at an additional $1,000 as an improvement over your status quo reference
point. When we discussed this situation the second time, you were already guaranteed $1,000. Using a di erent term, you were endowed with $1,000. at then became your reference point, and it changed your perspective. You were no longer thinking of $1,000 as an improvement over zero.
You were thinking that $1,000 was a pretty lame consolation prize when you were this close to a new car.
It’s easy to see this phenomenon when we are talking about drawings, but I also think it exists during the play of certain video poker hands.
Assume you are playing dollar NSU Deuces Wild, and, with a W indicating a deuce, you are dealt W W W 3♣ 4♣. Your only two reasonable choices are to keep the straight
two di erent straight ush cards were dealt, the value of the deuces by themselves could decrease to slightly less than $72.00. Even so, it’s way more valuable than keeping the $50 straight ush.) With this dealt hand, I’m going to hold the deuces by themselves one hundred out of one hundred times. For me, it’s not a close call at all.
Now let’s look at this from the perspective of endowment. When you were dealt the straight ush, you were endowed with $50. at’s your new status quo. You now need to make
your decision based on that status quo.
Consider this chart, which shows the 1,081 unique draws
you can make to those three deuces:
Frequency Percent
4 of a Kind (Lose $30) 815 75.39%
Straight Flush (Break even) 114 10.55%
5 of a Kind (Win $30) 66 6.11%
Wild Royal Flush (Win $75) 40 3.70%
Four Deuces (Win $950) 46 4.26%
1081 100.00%
Notice that seventy- ve percent of the time you are going to lose $30 of your $50 endowment. When you’re actually playing in the casino, you don’t normally have access to this chart, but you will probably remember that most of the time holding only the three deuces back res. Some people will remember this as,“I never connect on four deuces from this position!” To me this is no big deal, but some players have strong negative feelings about giving away any part of their endowment.
When we deal with math, there’s usually no room for feelings, personal preferences, or what we consider to be our endowment. But in this case, we have to assess how we feel about losing $30 seventy- ve percent of the time compared to owning a much smaller chance (about fourteen percent) of
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PAGE 26
SOUTHERN CALIFORNIA GAMING GUIDE
DECEMBER 2013