The economics of poker: current events

Two small poker notes: First, I've been asked about the recent Borgata tournament that was cancelled because they found fake chips in it. This incident is interesting to me largely because I've long believed that we're in for a rash of cheating incidents as our collective memory of cheating and knowledge of poker security fades. Wherever there is money there are people trying to steal it. Many players (and staff) don't know how to protect the game, and I think we're collectively out of equilibrium. In five years I think we'll see a little more security diligence and I think we'll be better off for it. Keep in mind, of course, that this happened at one of the best-staffed poker rooms in the world.

What to do with the 27 remaining players at the Borgata is a difficult question--it depends heavily, I think, on what we learn about the extent of the cheating. The more disruptive the fake chips were to the tournament, the less sensitive the eventual resolution should be to the current chip counts.

What to do more generally is to be more diligent about chip sets and chip security in general. The World Series of Poker does not keep the ratio of the starting stack to the buy-in constant--in the Little One for One Drop, for example, you get 4,000 chips for your $1,000 (plus rake). I also remember the final tables of shootouts beginning with equal stacks much larger than the average stacks the players had won the previous day. While this sort of security worry is somewhat mitigated in this context--you can count the chips at the end of the day, and there are only a few suspects if any have gone missing--it is very dangerous in general to put millions of devalued chips in play at the WSOP.

Second, Lee Jones has recently written that tournament poker players ought to dress better, and that we stand to make big money in sponsorships and added money if we do. Lee is an awesome and insightful guy, and I imagine that there would indeed be more money in poker tournaments if final tables looked snazzier.

I disagree, though, that players would see much of that money. It is a fundamental economic lesson that such influxes of money are not divided equally but captured by those most able to capture it. Here, even though there would be money coming in to poker, it's the tournament hosts who would be able to capture it. Way back in the day--2003 or so--I remember Howard Lederer predicting that there would be lots of added money in poker tournaments because the game was booming. Eventually, players realized some nice gains: we saw satellites with some overlay and we had some nice inducements to wear poker site patches. The vast majority of the money that came into tournament poker from sponsors, however, was captured by tournament hosts. This should not have surprised the economically literate.

One possible equilibrium here is for tournament hosts to offer modest inducements for players to commit to dressing well if they make a final table, for sponsorship money to increase a bit, and for the hosts (and perhaps a few famous players) to pocket the vast majority of that sponsorship money. The more likely equilibrium is for the status quo to persist. Lee might be right that this would be good for poker, but I disagree that players stand to gain much.