Bluffing as a Mixed Strategy

Thomas Norman

No 590, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: In von Neumann and Morgenstern's sample model of poker, equilibrium has the first player bet with high and low hands, and check with intermediate hands. The second player then calls if his hand is sufficiently high. Betting by the low hands is interpreted as bluffing, and is a pure strategy. Here we show that this equilibrium is nongeneric, in the sense that it ceases to exist if the first player is allowed to choose among many possible bets, rather than just one. Moreover, Newman's solution for this case - which also has pure-strategy bluffing - is shown not to be a sequential equilibrium. However, a modified solution - where low hands bluff using mixed strategies - is a sequential equilbrium.

Keywords: Poker; Game theory; Mixed strategies; Perfect Bayesian equilibrium; Sequential equilibrium (search for similar items in EconPapers)
JEL-codes: C73 (search for similar items in EconPapers)
Date: 2012-01-01
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
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