Squeezing out the best deal

Sep 11, 2006 4:14 AM

With the price of gas somewhere around $3 per gallon, more and more people are shopping around for the best price before filling their tanks. In fact, there are even web sites dedicated to this purpose. They track the price of gas at each gas station and allow people to find out before they leave their house which gas stations have the lowest prices.

If your car takes 15 gallons on the average fill-up and you save a nickel per gallon, you stand to save 75 cents on each fill-up. The irony is that people are doing this more as the price goes up, but the amount they are saving as percentage of the cost of the fill-up is actually decreasing. For some reason less people care about saving 5 cents per gallon when gas is $1.25 than when it is $3.

Imagine that you need a new printer cartridge for your printer. You can go to Store no. 1 that sells it for $22 or another store across the street that sells it for $20. Which one are you going to go to? Suppose you go into the second store and some of the cartridges are marked $20 while others are marked $15? Which one are you going to buy?

We’ll assume that they are identical cartridges with identical expiration dates. I’m going to guess that that the $15 cartridges will not last long. With more people going into the store that sells them cheaper and each customer buying the cheaper cartridges within the store, they will sell fast.

So, how come two casinos can offer the exact same video poker machine but with two different paytables and yet very few people will pick which one they will play based on the payback? Casino No. 1 may offer full-pay jacks or better paying 99.5% while the casino across the street is playing 8/5 jacks or better paying 97.5% and yet the same number of people are playing each.

But, it gets better. You can walk into a single casino and find one bank of full-pay machines on one side of the aisle and short-pay machines on the other side of the aisle. Again, each bank is getting about the same play. Why will the person who will drive an extra mile to save 20 cents on a gallon of milk not care at all what the payback of their video poker machine is?

The most likely possibility as far as I can tell is what I call the slot machine effect. For years, players have been conditioned to believe that the paytable is immaterial. After all, this is how it has been on slots since the beginning of time.

Two slot machines sitting side by side can have different paytables and you haven’t a clue as to which is set to pay higher than the other. Three bars may pay less on the first machine, but the machine may be programmed to have them show up twice as often.

There is simply no way to know. So, people assume the same is true of a video poker machine, but this is not the case. Video poker machines (at least in places like Las Vegas) MUST by law have the cards show up randomly. Each card must have exactly the same probability of showing up as any other card. As a result, the theoretical maximum payback of the game is determined by the paytable the machine uses.

Once you find the machine with the best theoretical maximum payback, you have to play each hand according to the proper strategy. Again, this differs greatly from slot machines where there are no decisions to be made.

Because the cards must be dealt randomly, nothing is predetermined. The cards you choose to keep/discard directly impact the results of the hand. Just because video poker is played on a computer does not mean the results are decided prior to the draw. Imagine that you are playing the game with a real dealer and a real deck of cards. The results will be identical in the long run.

If you play 600 hands per hour on a video poker machine at $1.25 per hand (quarter max-coin), you’ll play $750 per hour. By playing full-pay jacks or better (99.5%) as opposed to short-pay (8/5, 97.5%), you’ll save about $15. So, if you really want to save on gas, drive the extra block to the casino with the full-pay machines.