The 2+2 Forums Older Archives: Party Steps: Not a rake trap

Well at least nothing in comparison to the suggestions in the material I've read: it aint that bad

Forgive the tedium here: I posted this elsewhere I short while (on my blog).

A few months ago Party Poker introduced Step’s Single-Table-Tournament (STT’s). STT’s are one-table tournaments between 10 players. Traditionally there are three prizes: 5x buy-in to the winner; 3xbuy-in for second and 2x buy-in for third.

The steps structure was rather different. The ultimate goal was to play in a $1000 STT with prizes for first to fourth. To achieve this goal you could start in a $10 STT and work you way up. There were several entry levels, including direct buy-in to the $1000 STT. Each level provided an opportunity for a lucky two or three to move up to the next one, one just missing out might get another go at the same level and still another at a lower level. Every time you played, though, you had to pay tax (rake/commission) as in any other STT. So for example if you bought directly into a $50 (level 2) step you would pay $55 total. Now if you finished 3rd your prize would be another go at a level 2: i.e. $55 prize. However, only $50 goes into the prize fund since you pay another $5 rake. So Party appear to tax you when you buy in and tax you when they pay you out. The uproar began the value police were alerted. Was this a con to tax you to death as you moved up and down in a cycle of steps? I only became aware of the whole scheme when someone posted on his blog a link to this excellent mathematical analysis(http://www.livejournal.com/users/walterzuey/35457.html)

The worst case was the $10 entry, he showed that the tax for those players is effectively just over 50%. People marvelled at how all these players with no sense of value would have to overcome a ridiculous rake. Bowled over by the analysis, I rounded on Party too. It was another rip-off scheme, after all how are you supposed to beat 50% tax? However, I was largely wrong.

There is an incredible irony here. Now I would only call myself a ‘special’ in the force, but those very people who comment on how easily people are fooled and have no understanding of value, were themselves completely sucked in, as was I. In fact they didn’t think about the problem deep before deciding it was a mug’s game to buy-in at a low level. There are still angles here from Party, but the main one should have been greeted by a ‘So what?’ rather than a ‘Shock, Horror!’. The tax is no big deal: it is the deal.

Suppose at chaospoker.com you decide to buy-in to a $200+15 STT. The prizes are $1000; $600 and $200 respectively. It just so happens that there are also STT’s with the following buy-in: $370+30; $560+40; 950+50. You decide to reinvest to ply your returns directly into one of these STT’s. Assuming you have an equal chance in all of the STT’s you enter then you will expect to pay the following tax for your $215 investment.

$15 + 0.1 x 30 + 0.1 x 40 + 0.1 x 50 = 27

So by this guys approach: $188 equity; $27 tax: 14.4%

Sure it looks bad, but what’s the big deal people do this day in day out. Unless we decide to cash out we will always pay tax on our winnings.

Another example: chaospoker.com offer a deal: deposit $200 and play $20 STT’s at only $1 rake. The only catch is that you can’t withdraw the money til you reach $1000. This bears some resemblance to the step structure: you buy in for a fixed amount, win/lose, play several games but can’t cash out til you reach a certain goal (like the steps you could be in their for years). Suppose you’re an above average and you expect to return of $22 and a profit $1 from each STT. Now you would expect it to take 800 tournies to reach your goal with a whacking $800 tax. What would the value police say here? 400% tax on investment - stick to the 10 % tax STT’s! Of course it is nonsense, you are better off if you’re a winning player and get greater longevity if a losing one, because you pay less tax in each STT. Also, of course, while no such contract is drawn up this is what a lot of people commit themselves to all the time.

Still another example: Imagine tomorrow that Party decided not to pay you in full when you won an STT. They paid you cash minus a credit into another STT at the same level. While it infringes on liberties it would have precious little impact on value. If you can beat the game it wouldn't matter: you were going to play again anyway. But with some hocus pocus we can now accuse party of charging more rake:

E.g. $55 spent on a $50 + $5 rebuy.
Average player. 30% chance of winning a prize, which includes a credit to another $50 + $5 STT.
How much tax do we expect to pay?

The tax is 5 + 0.3*5 + 0.3^2 * 5 + 0.3 ^ 3 * 5 +...... + 0.3^n*5 (i)

The expected tax would be

5 * 1/1-0.3 = $7.14 (summing an infinite series)

Tax on equity of is 14.9%. The tax appears, through the analysis, to have increased by nearly 50% but the came has become no harder to beat.

This analysis linked above doesn’t so much explain how hard it is for folk to beat the ‘party steps’, it shows how hard it is to beat the game on-line period, for the majority of people. It’s quite simply the law of diminishing returns that applies to average on-line poker Joe. The Party Steps provide a perfect & graphic illustration of what we do day in day out on-line

If you beat the game at every investment point, then you beat the game. At the bottom level it’s 10%. If you beat it you win. The difficulty and the sly aspect to this is the flatness of the structure, this makes it a somewhat harder to beat – sometimes there are 9 prizes! Take it to the extreme and imagine a game where everyone gets money back minus the tax (i.e. places 1-10 are paid $50). You can’t beat it and clearly this benefits the card-room as eventually all the money goes to them (if we would be such fools). So flatter structures benefit the card-rooms, however this must be countered in part by the fact that the nature of steps – they increase variance: this is bad for card-rooms. If someone wins a big lump of cash then it is likely to be cashed out or inactive, either way it doesn’t earn rake.

So while the analysis is sound the conclusions drawn are false. In fact it would be fairly easy to construct a step structure that offers better value than the current STT’s (e.g. 5% tax) but would still ‘look’ horrendous after the analysis is applied.

The value police weren’t comparing like for like: ultimately you are paying the same amount of tax per STT whether it be standalone STT’s or Step STT’s. The difference is that you play more STT’s per unit investment in the steps and so you pay more tax. The flatter structure may make it tougher to beat than normal STT’s, but if player’s apply the wrong approach then it maybe easier for some.

The Jury’s still out on Party, but this bit of evidence should be thrown out. Party, I apologise, but you still have much to answer for.

Though I don't consider Party to be much of a rake trap: Prima-rounders is a fantastic deal and can save you fortunes on rake, any serious SNG player should give it due consideration: analyss there is on the other article and what's more you can largely avoid playing the higher/tougher games and stay in the low ones.

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