Abstract
A major issue in the widespread controversy about the legality of poker and the appropriate taxation of winnings is whether poker should be considered a game of skill or a game of chance. To inform this debate we present an analysis into the role of skill in the performance of online poker players, using a large database with hundreds of millions of player-hand observations from real money ring games at three different stakes levels. We find that players whose earlier profitability was in the top (bottom) deciles perform better (worse) and are substantially more likely to end up in the top (bottom) performance deciles of the following time period. Regression analyses of performance on historical performance and other skill-related proxies provide further evidence for persistence and predictability. Simulations point out that skill dominates chance when performance is measured over 1,500 or more hands of play.
Highlights
Poker is the most popular card game in the world
- performance robustness measure” (PRM): the performance robustness measure, defined as the average number of big blinds won per hand after correction for rake divided by the estimated standard error
Our study shows that there is a significant skill factor in online ring game poker, and that this factor dominates the luck factor after a moderate duration of play
Summary
Poker is the most popular card game in the world. Every day, hundreds of thousands of people play poker for real money on the Internet (Online Poker Traffic Reports). The substantial share of players who played relatively few hands in the measurement period may explain why the decile-level correlation between the average performances in the ranking and measurement period is only marginally significant.
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