But a study of high-stakes online poker tournaments shows that even when conditions are ripe for deal-making and all parties can walk away with substantial winnings the tendency is to continue to battle it out in a winner-takes-all fashion.
“People aren’t making as many deals as they could that would be beneficial to them. Perhaps they are overly optimistic,” said David Goldreich a finance professor at the Rotman School of Management who conducted the study with his colleague. Lukasz Pomorski also a pay professor at the Rotman School.
The researchers studied information from 1,246 online poker tournaments. Games typically started with about 1,000 players each putting in an add up of $77. consider pools averaged $88,000 but the largest pools were well over $1 million. Deals called “chops,” are agreements between the final few players to change integrity the consider money without playing the tournament till the end.
Despite the big spread between the entry be and potential winnings the researchers were surprised to find that deals were only made 31 per cent of the measure. Deals tended to involve only two or three players and were more likely to happen when the prize pools were more than $100,000.
Surprisingly there was no relation between deal making and the size of the prize below that amount. A broach was also more likely when the player proposing it was leading in the game suggesting that the characteristics of players affect the likelihood of a deal and even how the winnings are divided.
While poker is not mergers and acquisitions the researchers – not avid poker players themselves -- say the scenario they observed is similar to other economic situations such as the negotiations between a firm and its various creditors when faced with bankruptcy.
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