Economic Principles applied to Poker

Relatively few people who play poker have millions of dollars. Playing live cash games or playing online poker, at the highest stakes it is not uncommon to see players with thousands of dollars ready to go in at any moment. While it is great that these players are fortunate enough to have the money, is leaving the money in an account online the most economical thing to do?

There are a few basic principles of economics that would say no. I understand that a sizable bankroll may be necessary because there will be a need to reload and continue on playing if you lose. Having ready access to funds is important for any poker player. From a purely economic perspective however, it is an inefficient use of money.

One of the first principles to understand is opportunity cost. Strictly speaking, there is a cost to choosing one option over another. When you play a cash game of poker, you are potentially sitting with thousands of dollars in front of you. This cash is money that cannot be invested elsewhere because it is with you. If you play in an online poker room, leaving thousands of dollars in an online account is even more inefficient because there is a period of time between your withdrawal and when you get access to the funds. If you have the option of a bank wire the time period between withdrawal and receipt of funds is substantially less, but due to current U.S. law there may be some onerous restrictions.

The next principle is somewhat related, it is called the time value of money. To understand this, ask yourself a simple question, would you rather have X amount of money right now or X amount of money in a year? From a strictly economic point of view, having the money now is a better choice. Being able to put the money to use now has more value because you can invest it and earn interest. If you were to take the money at a later date you lose out on the potential earned interest. Anyone involved in a prop bet of some sort would do well to demand the money be paid immediately upon completion of the bet because of this reason.

If you are lucky enough to have thousands of dollars in your bank roll and are not using it withdrawing a portion of those funds is not a bad idea. You can use that money to invest or deposit into a bank account where interest will be accrued. After you make a big score, just remember that the opportunity cost of playing poker can be high and the time value of money means it may be better to withdraw funds than leave it in an account online.