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Poker Player Behavior After Big Wins and Big Losses

Department of Economics, Pomona College, Claremont, California 91711
Department of Economics, Pomona College, Claremont, California 91711
Department of Economics, Pomona College, Claremont, California 91711
gsmith{at}pomona.edu
mbl02004{at}mymail.pomona.edu
rjk02004{at}mymail.pomona.edu

We find that experienced poker players typically change their style of play after winning or losing a big pot—most notably, playing less cautiously after a big loss, evidently hoping for lucky cards that will erase their loss. This finding is consistent with Kahneman and Tversky's (Kahneman, D., A. Tversky. 1979. Prospect theory: An analysis of decision under risk. Econometrica 47(2) 263–292) break-even hypothesis and suggests that when investors incur a large loss, it might be time to take a vacation or be monitored closely.

Key Words: prospect theory; break-even hypothesis; risk; investment
History: Received: July 5, 2008; accepted: April 29, 2009.