9 Jun

How to Use Game Theory in Gambling

How to Use Game Theory in Gambling

Game theory teaches us to model a tactical framework for casino strategies, based not just on the rules of the game at hand, but the social side of the game; more specifically, the person or people we are competing against, and/or alongside. It can be applied to all sorts of casino-style gambling games, including poker and blackjack.

 

How to Use Game Theory to Your Advantage

The effective implementation of game theory is complex. The journey begins with knowledge of the concept, gaining a true understanding of what it means to employ game theory, followed by a few skillful lessons in the process of its employment, and its intended outcome. It’s not so difficult, if you’ll just bear with me through the steps.

  1. Understanding the Concept: Game theory is a branch of mathematics applied to social situations that stresses the strategic aspect of decision making based on the other players…
  2. Theoretical Motivation: In gambling, every advantage is worth exploring. The application of game theory increases a player’s advantage by exploiting the social aspect of the game…
  3. Poker Game Theory: The direct player-vs-player interaction makes poker the most obvious form of gambling where game theory can have a significant impact on your strategy…
  4. Applications in Blackjack: Although you compete against the dealer, not the players around you, their actions do impact your game and reflect upon the efficacy of your strategy…
  5. Eligible / Ineligible Games: Not every casino game is eligible for game theory exploitation. There must be multiple players, and/or an impact from other players based on decisions made…
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1. Understanding the Concept of Game Theory

The concept of game theory is only as complicated as its definition. For example, it takes a true mathematician to understand the meaning of game theory as defined by the Stanford Encyclopedia of Philosophy, which states:

“Game theory is the study of the ways in which interacting choices of economic agents produce outcomes with respect to the preferences (or utilities) of those agents, where the outcomes in question might have been intended by none of the agents.”

One look at that, and most people would run away screaming! But other sources define the term in a way that is much easier to comprehend. Encyclopedia Britannica, for instance, defines game theory as:

“…branch of applied mathematics that provides tools for analyzing situations in which parties, called players, make decisions that are interdependent. This interdependence causes each player to consider the other player’s possible decisions, or strategies, in formulating his own strategy.”

It makes a lot more sense when you put it that way. In truth, the concept of game theory is not complicated at all. It is merely the act of observing other players to gain an understanding of how they play and strategize a game, then using that information to help develop your own, superior strategy.

As you’ll soon learn in the following sections, game theory can be applied to player-vs-player games like poker, as well as any other strategically decision-based game where other players are present.

2. The Motivation Behind Employing Game Theory

The application of game theory increases a player’s advantage by exploiting the social aspect of many casino games. When properly applied, it is capable of increasing your edge over other players at the poker table, or giving you greater insight into correct decision making at the blackjack table.

The advantage you gain from game theory will depend on three major factors:

  1. The nature of the game, its rules, standard RTP, etc.
  2. The players around you and level of strategy they employ.
  3. Your ability to read those players and predict their actions/motivations.

The common denominator in every effective gambling strategy is its ability to minimize risk and maximize win potential. No matter how big or small the advantage may be, every advantage is worth exploring.

3. How to Apply Poker Game Theory

Game theory is easiest to apply in a gambling situation where a group of two or more players are competing directly against one another. As such, there’s no more useful application of game theory than in at a poker table. Poker is the epitome of social gambling. Whether you’re competing heads-up against a single opponent, sitting at a full ring game, or taking on a massive multi-table tournament, optimal game theory can and will improve your odds.

The vast majority of poker players base their decisions on their own hand, and the odds of that hand improving over time. They build a reputation as a certain type of poker player (tight, loose, passive, aggressive, bluff-happy, maniacal, etc.), then make moves based on what other players perceive them to be. “This guy knows I play tight/aggressive; I’ll be able to bluff him easily with a big bet.” Game theory turns the tables completely around, so that you’re playing based on your perception of them, not the other way around.

If you’ve watched Canadian poker pro Daniel Negreanu play in the last few years, you’ll understand the benefits of this strategy. He calls it Game Theory Optimal, or GTO for short, and it’s helped him gain a whole new advantage over the pro poker circuit.

You can learn more about Negreanu’s path to theoretical enlightenment and how to exploit GTO here:

4. Learn How to Use Game Theory in Blackjack

As useful as game theory is at the poker table, you might think it cannot possibly translate to house banked games like blackjack. In truth, so long as there are other players, and each one is making decisions that impact the outcome, game theory is relevant.

Counting cards is an automatic employment of game theory. You’re taking into account all of the cards seen by every player at the table, and deciding your actions – your bet sizes – your hits and doubles – based on the evidence gathered from them. It’s not always automatic, though.

If the player ahead of you is not strategically motivated, you may need to adjust your own strategy to cope with this. Otherwise, when that player flippantly hits a 17 against the dealer’s 5, receiving the 10 you were planning to double down for, you could go into a volatile rage. The inability to control your emotions often translates to mistakes, which will result in an inevitable negative impact your return.

Don’t just play the game. Play the players. Or, in the case above, you may choose not to play that table at all. Game theory will help you decide the right move in any situation.

5. Sorting Eligible and Ineligible Games

Game theory can be utilized in a lot of different types of gambling games. Two elements must exist in order for game theory to be applicable. First, there must be two or more players involved. Second, each of those players must make decisions that directly impact everyone’s game. As we’ve already discussed, games like poker and blackjack easily fit the description.

Unfortunately, there are a lot of casino games that cannot be exploited by the application of game theory. We can classify these into two major groups; single player games and those that are not impacted by decisions.

Single-Player Games: There is no social science behind any single-player casino game. These include games like slot machines, video poker machines, keno, and every RNG-based online casino game ever produced.

Non-Decision-Based Games: Any game where a player makes a bet, then simply waits for the outcome, lands in this category. This includes some of the most popular house banked table games, like baccarat and roulette.

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