Sports Betting, Game Theory, and Poker
https://www.pokernews.com/strategy/thinking-poker-picking-football-games-game-theory-poker-19987.htm
One of the obvious ways in which the importance of understanding game theory can be seen is on a poker table, where the difference between a beginner, who sees poker as a game of trying to get pairs and flushes, compared to the experienced player, who thinks of the game as a set of possibilities, with the goal of winning the whole game, not just the single hand in front of them. The author gives an example in which there was a group of people who bet on choosing the winners of 35 college football games, with each game being assigned a number 1-35 by the individual. For each game they that they choose the winner of correctly, they receive that many points. Point values and game winners were allowed to be changed up until the game started. Using game theory, this situation becomes more complicated than simply choosing who wins the game. The goal isn’t to maximize your own points, but rather to get more points than any of your opponents.
Going into the final game, which was FSU vs. Auburn, player A was ahead by 10 points, and both player A and player B had assigned a point value between 30-35 for the game, which lead to two possible outcomes:
1) Player A and Player B choose the same team, and Player A wins regardless of who wins the game (they either both receive between 30-35 points and player A still wins because he is currently ahead by 10 points.
2) Player A and Player B choose different teams, and whoever picks the winner correctly wins the game.
Because this was the final game, both players were unable to change the point value they assigned to the game, but were able to change which team they chose to win. FSU was the heavy favorite going into the game, with a 77% chance of winning, a the simplest approach to this would simply tell you to choose the team that is favored to win. However, by using game theory, and specifically by finding a mixed strategies nash equilibrium, we are able to find the percentages of how often each team should be chosen. After computing this, Player A actually used a random number generator using these percentages, and ended up changing to Auburn, whom player B had chosen because they had thought player A would have chosen FSU.
In this situation, similarly to how the game of poker should be approached, both players were making decisions that were not necessarily based on picking who they thought would win the game, but what gave them the best chance of beating their opponent. Poker can be an extremely valuable asset in helping make our real world decisions, as the game theory involved can help us better understand how to think about everything at play, not only what is in front of you but also what your opponent might have.