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 Economics
and Sociology are social sciences which among other things, attempt to describe and predict human behavior based upon people’s wants and
needs. Economists and Sociologists frequently use models to help them try to do this. A model is a theoretical set of conditions created
by the scientist which, when evaluated using logic, will help them understand why or how certain types of human behavior occur. Models
are useful to help one understand complex situations, but their usefulness is often limited because they are tiny, hypothetical
constructs that do not mirror real world situations. Models are constructed with specific variables, and a specific set of conditions,
whereas in the real world, there are an infinite number of variables and conditions for any given situation. A model is very much like a
photograph, seeing it can help you gain an understanding of the scene it pictures, but the amount of information it provides is limited.
Game theory is a branch of Mathematics commonly used in the field of Economics. Game theory is a method of using logic and mathematics
to evaluate games. A game is simply a model, or a set of conditions or rules, under which two or more people (often called actors) are
engaged in a competitive situation, and where they are each trying to further their own best interests. The model’s conditions may
regulate the actor’s access to resources, information, or anything critical to strategic decision making. In a classic game theory
scenario, when making strategic decisions, each player has to consider both their own knowledge as well as what they know about their
opponent’s knowledge, and how each is likely to affect the other’s actions. The most common model used to introduce game theory to
Economics students is called “The Prisoner’s Dilemma.”
Game Theory Modeling and Poker
Game theory can be applied very effectively to poker situations, because a poker game can be a perfect game theory model. You have a
framework of rules which establishes a competitive situation. You have competitors with similar goals (to win the pot), but different
levels of knowledge and ability. These different levels of knowledge and ability lead to differences in decision making, which in turn
lead to differences in competitive outcomes. In a game theory model, you can tweak each competitor’s level of knowledge and ability. You
can also change what each player knows about what their competitors know. These changes can cause them to perform either more or less
competitively in their games. You can reverse engineer the same logic as it applies to your own level of competition when you play
poker. If you want to perform more competitively, you have to improve your decision making. This comes from tweaking your knowledge and
ability. Gaining proficiency in game theory concepts can help you in this regard, as it will provide you with a logical framework to
guide you through your strategic decision making.
When you make a decision in a poker game, whether you realize it or not, you are already using game theory. You are an actor in a game
theory model. Before every action, you make an evaluation of the competitive situation that you are facing. Based upon your ability and
level of information about the situation, you come to a conclusion about which of your options would be your best course of action. In a
poker game, these actions are check, bet, call, raise, and or muck. Each time that you select one of these actions, you are affecting
the outcome of the game. Each time you select the correct action, you improve your prospects for
success over the long run, and each time you fail to do so,
you hurt your prospects. The key to success in poker is to consistently select the correct action when it is your turn to act.
We make logical decisions about how to act based upon the information that we have available to us. If everybody played with their hand
exposed face up, our strategic decisions would reflect the additional level of information, and we would be more apt to make the correct
decision. But sometimes our failure to make correct poker decisions, comes not from a lack of information, but from an inability to
correctly identify and act upon information we do have access to. To improve decision making, we have to improve the way in which we
process information. This means that we have to do a better job of extracting the bits of information from the existing mass that are
strategically relevant to our or our opponents’ decision making. It also means we need to do a better job of evaluating how the relevant
information affects logical decision making. By using game theory principles as a logical framework for our strategic decision making,
we can improve both our recognition of the information that is relevant, as well as logical process we use to evaluate it. This is poker
logic. If you improve your game by sharpening your analytical tool kit, it will translate into greater success on the felt.
For more about poker logic, also read:
Poker Game Theory
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