In other articles available on RoomReview.net we have already discussed the expected value concept in Texas Holdem poker. If you didn’t read this article, or if you don’t remember what the expected value is, you can continue reading this article anyway, just remember that the expected value is the amount of chips you expect to win from a certain bet, raise or call. You shouldn’t underestimate this concept, because in the majority of ring game situations you only need to understand the expected value concept and the implied concept to make correct decisions in most cases. However, proceeding from the expected value concept, we must pay attention to one essential assumption – every buck has the same equal value. Do you agree? If yes, then you are wrong, because although each dollar is equal in everyday life, it is not always equal in Texas Holdem poker in general and other poker games in particular. For example, let’s suppose that you have a 1,000,000 bankroll and someone offers you to make a one million bet on the coin outcome. Would you actually make such a doubtful bet? Well, some people may agree, but most people definitely wouldn’t. In this case people’s decision is based on the fact that second million dollars won’t bring them much utility, or satisfaction and if they’ll lose – they’ll be very unhappy. Second million, second car or penthouse wouldn’t be equal to the possibility of bankruptcy. The fact is that utility of money varies depending on how rich you are. Any size of the fortune is always associated with a certain stage of utility and it is not necessary that it will definitely grow uniformly. It is a fact that for most millionaires I know, second, third and any subsequent million is not as valuable as their first (and last) million, which is frequently called the Diminishing Marginal Utility. People who won’t bet their one and only million and generally never tend to risk are usually called risk-averse. As I’ve already said there are some people, who would accept this million bet. We usually call these people risk-neutral, or risky. At the same time there is another group of people that wouldn’t accept this bet, unless they had a 55% chance (instead of 50% chance) of winning. But what would happen if you were offered such a bet with only 45% chance? You may doubt my words, but there are people, who would take this bet anyway. Their decision relies in the marginal utility that they get from winning the second million. It actually overcomes the utility they get from becoming rich for the first time. For example if they need two million dollars for medical purposes or something.

Besides of all other things, increased marginal utility somehow explains why a lot of people tend to play bingo or take party in different lotteries. In most US states you can get only a quarter of expected utility on each dollar you invest in lottery tickets, which means that you get nearly totally negative odds. What is more surprising, even those people who know actual odds of winning at lottery still buy tickets and hope to get lucky, since even the tiniest chance of becoming incredibly rich is worth money they spend. This group of people is usually called risk-tending, or risk-loving people. These people form the majority of inveterate gamblers, players that tend to stay on tilt. It is most likely that they will enjoy accepting any kind of bets with negative expected value.

Expected Utility and Texas Holdem Poker
Well, what does all this theory has to deal with Texas Holdem and other poker games? Using the expected utility, you can make reasonable decisions instead of relying on luck. Psychological type of your opponents will affect their style of play. Most people are pretty scared, when they move to higher limits, because the more money they bet, the more money they can possibly lose. This helps to understand why it is reasonable not to play at limits that you aren’t ready for. In case if you still feel risk-averse, then you can play at this level at ease, but if you feel scared to lose your money – get back to the limit you’ve been playing before. Fear of losing money is probably one of the greatest impediments on your way to success, because your fear wouldn’t let you concentrate on the game and force you to make stupid decisions like folding, when you have good chances to hit the pot.

Read more: Expected Utility in Texas Holdem Poker Part 2

Also recommended:

1. Expected Utility in Texas Holdem Poker Part 2
2. Expected Value and Fold Equity Explained