Measuring Skill and Chance in Games

Peter Duersch, Marco Lambrecht and Jörg Oechssler
Authors registered in the RePEc Author Service: Peter Dürsch

No 643, Working Papers from University of Heidelberg, Department of Economics

Abstract: Online and offline gaming has become a multi-billion dollar industry. However, games of chance are prohibited or tightly regulated in many jurisdictions. Thus, the question whether a game predominantly depends on skill or chance has important legal and regulatory implications. In this paper, we suggest a new empirical criterion for distinguishing games of skill from games of chance: All players are ranked according to a "best-fit" Elo algorithm. The wider the distribution of player ratings are in a game, the more important is the role of skill. Most importantly, we provide a new benchmark ("50%-chess") that allows to decide whether games predominantly (more than 50%) depend on chance, as this criterion is often used by courts. We apply the method to large datasets of various two-player games (e.g. chess, poker, backgammon, tetris). Our findings indicate that most popular online games, including poker, are below the threshold of 50% skill and thus depend pre- dominantly on chance. In fact, poker contains about as much skill as chess when 3 out of 4 chess games are replaced by a coin flip.

Date: 2017-12-22
New Economics Papers: this item is included in nep-gth
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
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Journal Article: Measuring skill and chance in games (2020)
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