Risk IQ Part 1

The board is A♥A♦A♣4♠2♦ and you check Q♥Q♣. Your opponent bets $500 into a pot of $500. You are positive he can have all combinations of KK, and plenty of hands that you beat. You are also sure, based on previous knowledge of him, that he does not have quads. However, you also know that his $500 bet is balanced, which means your Expectation Value of calling (you are getting 2:1 on a call, and win a pot of $1500 33.33% of the time) and folding (your stack of $500 remains intact) is the same.

The above provides an example of a scenario in which the player who can call or fold will end up, in terms of Expectation Value with the same stack ($500). But should any player in the same type of scenario view the outcomes the same way?

Let us look at another example.

We are asked to play a dice game. The rules are as follows:

• We roll a die and get paid based on the outcome of the roll. The payoffs are:

RollPayoff1$1.002$2.003$6.004$22.005$200.006$1,000,000.00Avg$166,705.17

No surprises. Each payoff provides an extra $50k (starting wealth of $100 — $50k you paid, multiplied by the payoff for each wager).

So even though our Expectation Value of 216.7K is higher than our starting wealth of $100k, why shouldn’t we play the game? And which variable determines how much we should pay to play the game?

Stay tuned for Risk IQ Part 2

F