Working on a consulting project this week, I stumbled on a paper by Hersh Shefrin
, who has written extensively on the subject of Behavioral Finance. He sumarizes that there are three aspects (in general) to the topic. I started wondering about its implications in a poker environment. I haven't found anyone that has written on it yet, so I'll keep thinking and digging:Heuristics
: People often make decisions based on approximate rules of thumb, not strictly rational analyses. See also cognitive biases and bounded rationality. Framing
: The way a problem or decision is presented to the decision maker will affect their action. Market inefficiencies
: Attempts to explain observed market outcomes which are contrary to rational expectations and market efficiency. These include mispricings, non-rational decision making, and return anomalies.
My immediate thoughts are that the average player would be categorized as one using a Heuristics
strategy, an advanced player would be one employing both Heuristics and Framing
, which leaves Market inefficiencies
. The word "inefficiencies" triggers thoughts of "exploitative" strategies. So I would consider players that employ game theory
to be categorized as using Market inefficiencies
in their economic model called a poker table. Thoughts?
posted by Michael Damphousse
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