Essay: Game Theory Is a Critical

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[. . .] ("gambling," 1994) An odd thing to see is that the World Trade Organization declared this act only applicable in the United States and not in other countries around the world. Regardless, United States still agrees to apply its rules all over the world. ("gambling," 2012) Americans have a long history and an unfortunate predisposition to betting. Americans are known to take a risk on an idea or a game just so they can attain more profit from it. (Millman, 2007) Seeing how sports have engulfed every aspect of life, it is an important part of the everyday routine. Unfortunately, the controversies and scandals of sports betting range from high school level to international level sports. (Putnam, 1999)

When it comes to sports betting, gambling becomes an even more risky and dangerous business. A lot of people play games different and who exactly will you choose. It's not likely that people in a match or in a tournament will play according to who you want, then how possibly can a person place a theory on something like humans who are so predictable and random all the time. (Heap & Varoufakis, 1995) Sports betting markets are a sort of prediction markets in which analysis is quite necessary. That is to say those lots of different variables and derivatives prices affect the outcome. The forecasts which have been made can only turn out to be accurate if certain factors and variables are kept under control. (Nisan, 2007) One strategy that many put into play by using game theory and sports betting is the fact optimizing on the favorites. In sports betting, the deal doesn't have to be with two people, it can be with more than one person. A smart way to play is such that regardless of who wins, the person earns a net profit.

Practical example:

A Practical example is suppose there is a super bowl match between the Washington Red Skins and the Dallas Cowboys. Seeing how this is practical example, the amounts are kept small and simple. In real life the amount is big and in millions and billions. Person A thinks that the cowboys will be victorious with a probability of .75. On the other hand, Person B. thinks that redskins will win with a probability of 3/5. The game theory puts forward for the fact that the loss always should be lesser as opposed to the gain. In the above scenario, if you come in and you want to do a bet with both these people but you assign the winning amount in a smart manner. You tell A that you will give him four dollars if the cowboys are victorious, but he will pay you four dollars if they lose. The EV in this scenario for A is a positive one and he will go for the bet. That is keeping his probabilities in mind and what he thinks the end result will be, A thinks that he will win about 1.75 dollars if he wins. On the other hand, you are dealing with person B. that if the redskins win, you will give him four dollars but he will give five dollars if they lose. Seeing how EV is positive for him as well, he will also go for the bet. Now, you have dealt yourself with two different people and regardless of who wins or loses, you will end up with a dollar profit.

The game theory basically sums up what a certain person is likely to do in a situation. Surely, if two teams are playing, they both want to win. This comes back to the concept of factors that determine the outcome in sports. In games of chances such as gambling and poker, it all depended on probability and which number or which deck of cards a certain person is likely to get. In this instance, however it is the fact that the people playing can be of a different built. In majority of the sports, the fitness level of the athlete really determines whether he or she is likely to score well for the team or not. If there is a player who always plays well and is likely to score may three pointers in a game, there will be positive betting for him. Let's say that same player goes on to injure his leg minorly. Even though he might not sit out, his performance will be affected by that injury. It is factors like that can render the theory not applicable to sports betting.

Another factor that affects sports betting is team work. There is no guarantee that when one person of a team plays in the positive direction of the bet, so will the others. Taking again the example of cricket, if the batters go on to make a good score in the first inning, they are relying on the bowling power in the next innings. If the bowlers are pathetic and not able to defeat the rivals in batting, then the good scoring would be of no use.

When it comes to the idea of individual players, the game theory can still be applied. The bookies or people, who set the bets, take good notice of who is playing well and who isn't. They are well accustomed to the playing style of the person and how they are likely to react in a certain situation. A professional bettor looks at patterns and statistics. For instance, if there is baseball better, he will notice that whenever the team starts off with a left-handed pitcher following a loss, it is likely to win that game that day. The bettors look at records and statistics like these and then go on and make their bets. A single coincidence can be considered a fluke and thus can be rendered inadequate to place a bet. In this instance, it was noted that it was only due to the presence of the left handed pitcher, the team won. Thus the game theory can be applied in sports betting when certain abilities and disabilities of players are kept in mind.

References

Anon. (1994) Gambling. In The Columbia Encyclopedia. (6th ed) n.a: Columbia University Press

Anon. (2004) Gambling. In The Columbia Encyclopedia. (6th ed) n.a: Columbia University Press

Anon. (2012) Gambling.In The Columbia Encyclopedia. (6th ed) n.a: Columbia University Press

Aumann, R. And S. Hart (eds) (1992) Handbook of Game Theory. Amsterdam: North-Holland.

Beck, J. (2008). Combinatorial games: Tic-tac-toe theory. Cambridge: Cambridge University Press.

Dalla, N. (2002). Game Theory .net - News stories by field of study. [online] Retrieved from: http://www.gametheory.net/news/items/095.html [Accessed: 25 Dec 2012].

Good Math, Bad Math (2009). Introducing Game Theory. [online] Retrieved from: http://scienceblogs.com/goodmath/2008/03/19/introducting-game-theory / [Accessed: 25 Dec 2012].

Heap, S.H., & Varoufakis, Y. (1995). Game theory: A critical introduction. London: Routledge.

Levine, D. (n.d.). What is Game Theory?. [online] Retrieved from: http://levine.sscnet.ucla.edu/general/whatis.htm [Accessed: 25 Dec 2012].

Millman, C. (2001). The odds: One season, three gamblers, and the death of their Las Vegas. New York: PublicAffairs.

Mindyourdecisions.com (2010). How to bet on sports and the Super Bowl using game theory - Mind Your Decisions. [online] Retrieved from: http://mindyourdecisions.com/blog/2010/01/26/how-to-bet-on-sports-and-the-super-bowl-using-game-theory / [Accessed: 25 Dec 2012].

Myerson, R.B. (1991). Game theory: Analysis of conflict. Cambridge, Mass: Harvard University Press.

Nisan, N. (2007). Algorithmic game theory. Cambridge: Cambridge University Press.

Putnam, D.T. (1999). Controversies of the sports world. Westport, Conn: Greenwood Press.

Schmidt, C. (2003). Game theory and economic analysis: A quiet revolution in economics. London: Routledge.

Sklansky, D. (1989). The Theory of Poker. Las Vegas, Nev: Two Plus Two Pub.

Swanson, J. (2005). Game Theory and Poker. [e-book] http://math.swansonsite.com/instructional/game_theory.pdf [Accessed: 25th December 2012].

Thesportsgeek.com (2000). Sports Betting Math - % Needed To Win at Sports Betting. [online] Retrieved from: http://www.thesportsgeek.com/sports-betting/math / [Accessed: 25 Dec 2012].

Turocy, T. And Stengel, B. (2001). Game Theory. [report] London:… [END OF PREVIEW]

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