vpFREE2 Forums

An Interesting Choice

#21

In general, it isn't possible to simultaneously satisfy player utility
and CE criteria. CE criteria (as used in this thread) is intimately
tied for log utility. If a player chooses any utility function other
than log utility, then s/he can optimize their chosen utility or
s/he can optimize log utility, but not both. The same applies
to minimizing risk of ruin -- it is just like choosing a utility function
which accomplishes that objective.

Bottom line: you can't have your cake and eat it too. Optimal
play from one perspective implies the play will be suboptimal
from all perspectives that aren't mathematically equivalent to
chosen utility function.

···

On Wednesday 17 November 2004 02:54 am, Harry Porter wrote:

The happiest of all situations, of course, is where player utility and
CE criteria are both satisfied by playing a game with desired
volatility that also has a greater return over less volatile choices.

#22

--- In vpFREE@yahoogroups.com, "Harry Porter" <harry.porter@v...>
wrote:

The happiest of all situations, of course, is where player utility

and

CE criteria are both satisfied by playing a game with desired
volatility that also has a greater return over less volatile

choices.

my player utility is bankroll growth so i rate positive games with
this formula:
(er+cashback-1)^2 x10^7/variance

i look for a value of 20 or more

below 20 is not worth it, i can play bj or texas hold'em or financials
or any of my other hobbies instead

i will play high variance games with the action junkies (those who get
off on the swings) but i require greater return to justify it

examples would be 10/6 double double bonus with cashback or 9/6 double
double bonus with progressive

#23

Harry,

Have you heard of the University of Chicago, where the CAPM model was
laid to rest in the early 1990's by Prof. Fama and French. Beta is
dead and does not do a good job of predicting stock returns. Many
uninformed people still use it because it is easy to understand and
use single factor model. Multifactor models are more usefull, not
including APT.

It's a relationship that can also be found in historical stock
returns. The risk factor, past price volatility, is measured as a
stock "beta" and there's a strong correlation between the past

return

of a stock and its beta. The adage "buy on the rumor, sell on the
news" reflects the fact that uncertainly reduces stock prices vs.

it's

adjusted inherent value / certainty restores (increases) the stock
price to that value (even when the actual outcome is identical to

the

rumored one).

------

But, that's not to suggest that a player who prefers a riskier game
over s safer one, despite an inferior return (say, 9/7 DB vs. 9/6
Jacks) is necessarily behaving irrationally. While it's true that
they're accepting higher risk without compensating return, another
economic principal that's key to a person's choices in life comes

into

play -- utility theory. To whatever extent the higher volatile game
results in greater play satisfaction/enjoyment, a sacrifice of
commensurate return is a reasonable response (but by commensurate,
that means that they fully offset that satisfaction with the greater
prospect of ultimately suffering the disappointment of ruin --
something that in actuality usually isn't given due respect).

The happiest of all situations, of course, is where player utility

and

CE criteria are both satisfied by playing a game with desired
volatility that also has a greater return over less volatile

choices.

I'll step off the soapbox :wink:

I agree with these thoughts on utility theory...perhaps you could
explain them to your friend iggy who doesn't seem to understand the
difference between recreational gambling and a vocation.

#24

jaydavidson118 wrote:

Harry,
Have you heard of the University of Chicago, where the CAPM model
was laid to rest in the early 1990's by Prof. Fama and French. Beta
is dead and does not do a good job of predicting stock returns. Many
uninformed people still use it because it is easy to understand and
use single factor model. Multifactor models are more usefull, not
including APT.

In brief:

- F/F didn't kill CAPM, but extended w/ add'l variables
- beta still a component of F/F

replied at greater length privately.

#25

--- In vpFREE@yahoogroups.com, "jaydavidson118" <jaydavidson118@y...>
wrote:

I agree with these thoughts on utility theory...perhaps you could
explain them to your friend iggy who doesn't seem to understand the
difference between recreational gambling and a vocation.

i just don't like to lose, sorry if that bugs you
life is short
when i go fishing, i don't go fishing to get drunk or to show off my
expensive outfit in exotic locations or maybe spot a celebrity, i go
fishing to catch fish, and sometimes i might use expensive bait, like
a live bonito, but it sure as heck isn't to catch another bonito
when i gamble (including stocks and options and investing which are
forms of gambling), i gamble to win
gambling is just like any other recreation to me
it's a very poor job unless your backup job is street hustler
gambling is not my vocation, but i do take it a bit more seriously
than say your average keno player

#26

nightoftheiguana2000 wrote:

i just don't like to lose, sorry if that bugs you
life is short

Jay's "utility" remark wasn't directed at your preferences for
yourself. Rather, he targets repeated comments that seek to
invalidate play choices by others that may be entirely rational based
on what drives their pleasure.

Your intensity suggests that they've engaged in live threatening
behavior. It's time for us to kick back and relax a bit :wink:

- H.

#27

--- In vpFREE@yahoogroups.com, "jaydavidson118"
<jaydavidson118@y...> wrote:

> But, that's not to suggest that a player who prefers a riskier

game

> over s safer one, despite an inferior return (say, 9/7 DB vs. 9/6
> Jacks) is necessarily behaving irrationally. While it's true

that

> they're accepting higher risk without compensating return,

another

> economic principal that's key to a person's choices in life

comes

into
> play -- utility theory. To whatever extent the higher volatile

game

> results in greater play satisfaction/enjoyment, a sacrifice of
> commensurate return is a reasonable response (but by

commensurate,

> that means that they fully offset that satisfaction with the

greater

> prospect of ultimately suffering the disappointment of ruin --
> something that in actuality usually isn't given due respect).
>
> The happiest of all situations, of course, is where player

utility

and
> CE criteria are both satisfied by playing a game with desired
> volatility that also has a greater return over less volatile
choices.
>

I agree 100%. When this choice is made with

complete understanding of the possible consequences to bankroll
(actually quite minimal when comparing 9/6JoB to 9/7DB) why not play
what satisfies your soul and gives you an adrenalin charge!

I personally. do NOT play 9/7DB. At my .25 level of play, it is
still very easy to find 10/7DB, and that is what I akways play.
However.....shudder.....my favorite game is DDB, and the 10/6
variety is difficult to find (at least downtown, where I play 95% of
the time)so I happily (and with absolute knowledge of the edge I am
surrendering) play the inferior pay-schedule 9/6DDB. I have also
been on the "wonderful side of randomness", for the most part,
during this folly. Hooray for the great part of the Bell Curve
which I have so far enjoyed. When it ends, as I know it will, well,
at least I enjoyed the ride!

Best of luck to all, whatever you play!

   Babe