Thursday, March 27, 2008

Numbers & Psychology

The Crazy BetLots of news these days about the current mortgage crisis. Heard yet another story on NPR’s Morning Edition today about it, after which came a interesting little report about a recent study conducted by a couple of Cornell University researchers concerning the attitudes of prospective home buyers.

The study looked into how home buyers tend to respond to asking prices. Specifically, the researchers wanted to figure out whether or not it mattered to buyers if the price was listed as a rounded-off figure -- say $680,000 -- or a non-rounded off figure like $682,417.

After conducting some tests, the researchers concluded that buyers have what they describe as a “built-in bias in favor of precise numbers.” (They kept referring to non-rounded-off numbers as “precise” in the report, although I think one could argue the term is not necessarily being used accurately here.) That is to say, the buyers were more likely to view a rounded-off number as higher, and thus were more inclined to buy the home with a non-rounded off price tag.

In their conclusion, the researchers decided this bias in favor of non-rounded-off prices is a vestige of our retail shopping experience. When we shop at the local hardware store and see an item priced at $9.02, we instinctively assume the price reflects some sort of savings to the consumer. Therefore, as the reporter explained, “when people see houses with precise numbers, somewhere in the back of their minds they think ‘discount shopping.’”

The segment concluded with a representative from a New York real estate company expressing skepticism about the researchers’ findings. According to her way of thinking, a non-rounded-off price tag wouldn’t necessarily be met with enthusiasm by some buyers. Indeed, the odd-looking figure might give the buyer pause since, as she put it, the price “would seem a little strange.”

You can probably guess where I’m headed here. This is a poker blog, after all.

Just so happened that right after I heard the NPR story I got out the iPod-like device and listened to the March 25th episode of PokerRoad Radio (with Brandon Cantu). At one point about halfway through the show, the hosts engaged in a brief digression concerning bet amounts. Gavin Smith talked about how he had been experimenting with differently-sized raises during the first day of the WPT World Poker Challenge, betting 225, then 275, etc.

That led Joe Sebok to make a comment about players online betting strange-looking amounts like 2,222 and how it makes him “want to go through [his] machine and punch them in the face.” Ali Nejad suggested that response was precisely why people make such odd-looking bets -- it puts opponents on tilt. (Sebok denied the bets actually affected his game.) “We’re anal. We want round numbers,” argued Nejad. Thus do some of us object when the bets come out all weird-looking.

With regard to that idea that we “want” round numbers, the Cornell researchers did point out how the non-rounded-off numbers “momentarily confuse” consumers, and while they surmised home buyers ultimately overcame that confusion to conclude the prices were favorable, the N.Y. real estate company rep suggested that confusion produced a different consequence, perhaps even turning off the prospective buyer.

We’ve all encountered that rogue at the poker table who keeps betting weird, hard-to-explain amounts. The bets usually come as the first raise on a given round, e.g., it is preflop, the blinds are 50/100, and someone open bets 333 or something. Such a bet certainly can “momentarily confuse” the table. Such a bet can also give the bettor a crazy-seeming image (possibly part of the plan).

Additionally, the non-rounded-off bet might be said to produce a practical consequence, namely, it makes it more difficult (for most of us) subsequently to calculate pot odds. Have talked more than once this week about my own struggles to calculate on the fly my “equity” in a given hand. Such problems can be even harder to solve when we ain’t dealin’ with easy-to-manage, round numbers.

In any event, I think I share the N.Y. real estate rep’s skepticism about the Cornell researchers’ conclusions. I don’t think the non-rounded-off price tag encourages buyers all that much.

I know it doesn’t work that way at the poker table, anyway.

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Blogger Littleacornman said...

Great post Shamus.I think that facing an odd sized bet can be confusing simply because a lot of instinctual play is based on patterns previously observed and as these bets sizes are rarer ,it becomes more difficult to equate them to a recognised pattern and act accordingly.

It always seems like it means something when someone makes an odd sized bet and that probably also helps make it a useful distraction for the bettor too.

I may have to try it more often!

3/27/2008 7:24 PM  
Anonymous Anonymous said...

What happens to me sometimes is that I use the slider at the PokerStars table and either let it go before getting to the end, or want make a halfway bet and don't care if I end up a few chips higher or lower (for example 1000 can become 992 or 1046)

3/27/2008 8:20 PM  
Blogger OhCaptain said...

I have a secret joy with odd bets, calculating an amount of a raise that returns the action to an even bet. So they raise it to 123, I re-raise 377.

The universe is whole again, and the look on their face when the realize the next line...500 to call.


3/27/2008 10:07 PM  
Blogger Short-Stacked Shamus said...

Haha, I love it.

3/27/2008 10:20 PM  
Blogger Rakewell said...

In cash games at B&M casinos, odd-sized bets significantly slow down the game. If you bet $21, the dealer is going to have to break down $5 chips into $1 chips for one or more players that call. It's stupid and rude and annoying. It's also self-defeating, if you're a winning player, because everything that slows down the game cuts into your hourly win rate.

Online, rounded versus nonrounded bet sizes can be a tell; some players will tend to use an odd size when bluffing and a rounded amount when strong, or vice-versa.

3/28/2008 9:30 AM  
Anonymous Tim Peters said...

Some people believe that odd-sized betting may signal collusion between players ("if I bet an odd number, it means X; if I bet an even number it means Y"), but this seems needlessly opaque for online players (IM anyone?). I have to admit that I'm with Sebok; I have a visceral hatred for the truly random bets ($312 instead of $300); I feel they're just designed to attract attention.

At the same time, online and live, I will often bet a small bit over the standard amount: $325 instead of $300, say. I think it appears to suggest a thoughtful bet. But I'm sure that's patently obvious to my opponents.

One final note on bet sizes: I am convinced of the power of Chris Ferguson's approach, outlined in The Full Poker Strategy Guide: Tournament Edition. He recommends varying your bet size only by position, at least when opening preflop. Two to two-and-a-half times the BB in early position, more in later position--regardless of your actual cards. I think this is just as deceptive at Gavin Smith's randomizing and less likely to draw attention.

3/28/2008 12:45 PM  
Blogger Amatay said...

Good post mate. Im one of those fish who bet strange amounts :-)

3/29/2008 10:25 PM  
Blogger Greylocks said...

I frequently make bets like 99 or 333 because it's easier to type in quickly than 100 or 350, not because I'm trying to be cute.

As for calculating pot odds when someone makes a screwy bet or raise, Windows comes with a pretty good calculator program.

3/30/2008 3:21 AM  
Anonymous Cadmunkey said...

Haha good post Shamus. I heard the Sebok podcast comment too and he made me chuckle with his reaction to strange bet sizes. I have to admit to doing this every so often, just to make it look like I've put some thought into my bet rather than choose an amount preselected by the 'bet slider'. Ive also noticed that some sites wont allow you to bet 'odd' numbers and they auto round off your bets!

3/31/2008 8:06 AM  

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