Expected value
Something which follows naturally from talking about the house edge, and which I found of the utmost importance in my work with poker A.I. is the concept of expected value (EV). The EV of an action is the sum of the probability of each possible outcome of the action multiplied by it’s payoff. In simple English it is the average amount you expect to make from taking an action.
A simple example is playing American roulette - the table has 38 equally likely numbers and a winning bet on one of them pays 35-to-1. Thus a $1 bet on a single number expects a profit of
which is -$0.0526 (this also shows the house edge in American roulette is 5.26%). We say that the expected value of the bet is -5.26 cents. When considering gambling strategy be wary of actions with a negative expected value - they are costing you money.
When playing poker we may be forced to choose between calling a bet we shouldn’t (with negative EV) and folding (EV of zero). In this case we should fold. We should always choose the action with the highest expected value.
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