Theory/Stats Poser - How much is 1% of a nobody worth?

Hitchhiker's Guide to...

Been thinking about this for a while, and really don't know if there is an answer. Maybe someone would like to venture a guess?

THE SITUATION:

A player has won an online tournament to a real-life $10,000 entry freezeout tournament with circa 7,500 players (e.g. the WSOP). All you know about their poker ability is that they have enough ability to win an online tournament.

They want to sell off a small porportion of their ticket to raise funds. They are selling it in 1% tranches.

THE QUESTION:

The face value of 1% of a $10,000 ticket is $100, but how much would you be willing to pay for that 1% of his potential winnings?

Obviously, it will be less than the $100 face value; but how much less?

Hectorjelly

$50 - $60 at a guess

cardshark202

Was thinking around 50 myself.

DeVore

I don't think you have enough information to make this judgement. At a guess I would say 30, having seen what the WSOP does to even experienced players first hand.

Then again Oscar would have fitted this profile last year and I'd have been happy to pay even money in that case.... you really need more info to nail it down to a closer range then that.


DeV.

Hitchhiker's Guide to...

I know there are statistics that give you the likelihood of a 'random event' happening - e.g. a 'nobody' getting into the money at WSOP, or (in my area of research) a freak event happening on the stock market.

Maybe they could be of use? Unfortunately, i don't use those particular statistical techniques (i concentrate more on the psychology of why these events happen in the stock market), so don't know how it would work. Does anyone?

Would the situation be different if you were offered a 'package' of 1/100th of 1 percent in 100 different nobodies in the WSOP? It would still have a face value of $100. Would you be willing to pay more that package?

Hectorjelly

DeVore wrote:

I don't think you have enough information to make this judgement. At a guess I would say 30, having seen what the WSOP does to even experienced players first hand.

Someone has to be eating up all that excess EV, it cant dissapear into thin air!

RoundTower

Roundtower2 wrote:

Would the situation be different if you were offered a 'package' of 1/100th of 1 percent in 100 different nobodies in the WSOP? It would still have a face value of $100. Would you be willing to pay more that package?

I think this would be worse, part of the reason you would back a single nobody is that they have a chance of a big score and you might get very lucky. Spreading the risk around defeats the purpose.

To answer your original question the only tournament that is like you mentioned (7500 players, $10k buyin) is the WSOP main event. Most (?) of the players in that are satellite winners and the standard is meant to be quite low. I would probably pay $70. In a typical $10k tourney I would pay more like $40.

DeVore

It would have to be a risk-reward analysis so not only do you have to look at the risk (how likely he is to make the money or lose you money) but also the reward (how deep into the money he will go). Now if the money was a linear payout structure that would be one thing but you need an equation which closely models the rising (non-linear though not true exponential) nature of the payout strucutre.

He might have a 15% chance of making the money for example but only a .1% chance of getting to the final table. So there is another equation required to express his decreasing probability in getting deeper and deeper into the tournie. In my opinion this is also non-linear because the field is made up of a fair number of internet qualifiers and donkeys along with a core of talented players/pros. I explain the reason for its non-linearity below.

Its these two equations I was referring to when I said we don't have enough information to make an accurate prediction on his ROI for the 1%.
Indeed you would expect that there would be a certain amount of "phase shift" in the equations, a point at which his slowly declining probabilty of getting X-far into the tournie would take a sharp nose dive as the dead money is burned off and the hard-core of good players primaraily remain. (No, "phase shift" isnt just a made up term in Star Trek! )

Plotting both of these equations and looking at the amount of space under both (the union of the integral of the two equations) gives you an idea of his likely return on investment. If you like doing double integrals of unknown equations for fun then go nuts, but at this point my head begins to hurt and I'll leave the rest as an exercise for the interested reader

I'm merely expressing what my opinion of the maths behind this question is I can't begin to give you specifics although we know the numbers behind the payout structure so standard modeling tecnhiques could be used to produce that equation or you could simply brute force the graph for a specific WSOP and be done with it!

I don't know enough about Quant Analysis to go any further with this question though and I offer this as opinion rather then gospel truth.

DeV.

Hitchhiker's Guide to...

bump - because i think i posted it too late at night, and the random thrash on this forum pushed it onto the second page ... it is an interesting proposition!