Re: Mason Malmuth on PokerStars Effective Rake and the Overall Poker Economy

No. If this statement was true, there wouldn’t be any casinos.

What kills games are small standard deviations relative to the expectation that top players can achieve. In simple English, bad players need to have enough winning sessions to keep them interested in playing and to make the games more fun for them. When this is not the case, the games tend to die. An example would be deep stacked no-limit hold ’em.

This of course assumes there are plenty of players to start games and keep games going. But this is something that regular players do, and most of them are winning players (though some might not win much). Thus if poker games become structured so that the luck factor is too high, they can collapse as well.

 Integrity of the game can be split into two sub divisions, the first being the fairness or equality of the game in regards to the rules and boundaries of it (obviously a very gray and debatable subject not to be gone into in this writing but certainly of great concern to all player types). This includes things such as security leaks that result in unfair advantages for certain players. The 2nd subdivision of integrity in poker is the profitability of the game (specifically that the brightest/best players get paid). The author wishes to show that it is poker of the greatest integrity that leads to moral poker (then the goal of course is to show that moral poker leads to ideal poker).

Many years ago, I once told a well known poker room manager that if he really wanted to have a successful poker room, he should take all his promotion money and give it to the ten worse players he could find, and then the room would fill up.

This is like negative rake I believe, somewhat akin to Milton Friedman‘s negative income tax, but should be seen as a means and not the ends I think.  It’s definitely to the Austrian side of economics.  The problem enters when the central banker is taken as an axiom, especially say in the form of X%.

But what is happening now is not anywhere near as simple as Negreanu describes. My understanding is that there are many players on the Internet who actually win little if any, but put enough time in that the bonuses they earn make it worth their time to play, and thus these people start games and keep them going.

But what this really means is that the games may be structured wrong

This is the question and your answer.  The games may be structured wrong and what I have come to understand sir, is that they actually ARE structured wrong.  And when we take the correct analytical viewpoint it becomes clear it is structured in the favor of the central “banker”.

That is the bad players lose too often, and thus quit playing. And by the way, this is nothing new to the Internet. Poker rooms in California have had an insane prop system for years where some of their customers pay way too much in rake, and some of their customers, the props, get all their rake back plus a little more.

Yes, social welfare, what is best? And for whom?

Many years ago, Donna Harris and I wrote a paper called Cardroom Theory — A Two-Way Street –. We certainly didn’t see things this way, and once you understand that regular players, which include the pros, are needed to start games and keep games going, this is certainly not the case. (This paper has been run in our Internet Magazine and is also available in my book [I]Poker Essays: Volume II.[/I])

I would like to read that paper I hope there can be a link to it. It is important because it is fundamental but not written in relation to the internet and certainly not in relation to decentralization which has now become an option.  We should add, one of the truest defining factors of the health of the game might be the overall economy that the poker is being played in.  Of course then we must look on a nationalistic vs international level and see that the economics of poker can be compared to that of the world markets and banking:

When one studies what are called ”cooperative games”, which in economic terms include mergers and acquisitions or cartel formation, it is found to be appropriate and is standard to form two basic classifications:

(1): Games with transferable utility.

(2): Games without transferable utility
(or “NTU” games).

In the world of practical realities it is money which typically causes the existence of a game of type (1) rather than of type (2); money is the “lubrication” which enables the efficient “transfer of utility”. And generally if games can be transformed from type (2) to type (1) there is a gain, on average, to all the players in terms of whatever might be expected to be the outcome.


It is so desirable in game theory to have transferable utility that that those using game theoretic analyses go ahead and use the transferable utility concept although it might not be entirely fitting except for individual games of comparatively small weight played by large poker sites.

So clearly what the author suggests is, poker can be viewed from a “higher level”, and played as such, possibly IF there might be the addition of new type of universal “money”, that might be used to create a universal “rake standard”.   And in doing so we might be able to shift the game into one of “NON-zero sum” for the players (in fact we can).

While this is partially right, if the regular players aren’t there, the rec players won’t have any games to participate in. The idea that it is all pros, or all rec players, is wrong. What’s right is that these two groups actually work together (even if most are not aware of this) and that the poker room needs to create an environment for this to happen.

What is seemingly interesting as well, and often missed is that if the effective rake is lowered then the amount of “winners” seems to increase.  Or is it that the losers lose less?  Or all of these?  What might be hidden is the effects on the overall economy of the game if each of the “levels” where “optimized” in the favor of the players.  Conversely we can think about how the game is structured today and who might be benefiting the most in this regard.

PSFTCIAFBIDOJ implicitly always have the argument that some good managers can do things of beneficial value, operating with the skins, and that it is not needed or appropriate for the players or the “customers” of the chips supplied by the site to actually understand, while the managers are managing, what exactly they are doing and how it will affect the “ROI” circumstances of these players.

I see this as analogous to how the PSFTCIAFBIDOJ were claiming to provide something much better than Ponzi schemes that they could not deny existed in all other sites. But in the end the “dictatorship of the proletariat” seemed to become rather exposed as simply the dictatorship of the regime. So there may be an analogy to this as regards those called “PSFTCIAFBIDOJ” in that while they have claimed to be operating for high and noble objectives of general poker welfare what is clearly true is that they have made it easier for their sites to “print money”.

Based on direct conversations that I’ve had with PokerStars management, they are well aware of the issues which I address above and understand the “two-way street” nature of poker. Perhaps this has something to do with why they have been so successful.


The idea seems paradoxical, but by speaking of “rake targeting” these responsible officials are effectively CONFESSING that, notwithstanding how they formerly were speaking about the difficulties and problems of their functions, that it is indeed after all possible to control rake by controlling the supply of chips (as if by limiting the amount of individual “prints” that could be made of a work of art being produced as “prints”).


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