What is Liar’s Poker?
“Liar’s Poker” is a game often associated with Wall Street traders. It involves a mixture of statistical reasoning and behavioral psychology tactics.
Key points to remember
- Liar’s Poker is a strategy and psychology game in which players hold random dollar bills with special attention to the serial numbers on their respective bills.
- It is also the name of a book by Michael Lewis that depicts the culture of bond trading on Wall Street.
- Liar’s Poker rules require an increase in bids, increasing the stakes in the game.
The rules of Liar’s Poker are quite similar to those of the “Cheat” card game. Players hold random dollar tickets with special attention to the serial numbers on their respective tickets. The objective of the game is to make opponents believe that your bid does not exceed the combined sum of all the serial numbers.
Liar’s Poker is also a book by Michael Lewis that depicts the Wall Street bond culture at Salomon Brother’s. Lewis, who previously worked as a bond trader, said he wanted the book to be a cautionary tale about questionable and deceptive behavior and practices in the workplace. But he admits that some people have used the book as a model for personal gain.
Understanding liar poker
In Liar’s Poker, if a player offers three “four”, he predicts that in all dollar serial numbers held by all players, there are at least three “four”. If the player’s bluff is not called, the next player must either offer a higher frequency of any other number (five “two”) or may offer a higher number at the same frequency level (three “six”).
Strategies in Liar’s Poker
The number of players in the game can affect the probability of winning, although the game itself rewards and greatly benefits those who use deception and trickery to win. Rather than simply betting as precisely as possible, players take turns trying to coax their rivals to make a mistake while playing.
The rules of the game require that bids continue to rise, thereby increasing the stakes in the game. With more than two players, it is common to continue to raise the bid given the probability of being challenged and the related probability of lose when challenged. The strategy is based on a continuous bluff in the hope of potentially winning.
The game is comparable to “Liar’s Dice”, a game where players roll dice, hide the numbers they rolled, and then bid on the total number of dice they believe were rolled by all players who this nominal value. Again, players bid and bluff until challenged by another player.
As a general rule, if a player poses a challenge in Liar’s Poker and is incorrect, he must pay the player he contested. If the player who was challenged was found to be incorrect, he must pay each player who challenged. Usually the payment is one dollar, but it can be increased according to the agreed rules.