Information encryption in the expert management of strategic uncertainty (1605.04233v1)

Abstract: Strategic agents in incomplete-information environments have a conflicted relationship with uncertainty: it can keep them unpredictable to their opponents, but it must also be overcome to predict the actions of those opponents. We use a multivariate generalization of information theory to characterize the information processing behavior of strategic reasoning experts. We compare expert and novice poker players --- "sharks" and "fish" --- over 1.75 million hands of online two-player No-Limit Texas Hold'em (NLHE). Comparing the effects of privately known and publicly signaled information on wagering behavior, we find that the behavior of sharks coheres with information that emerges only from the interaction of public and private sources --- "synergistic" information that does not exist in either source alone. This implies that the effect of public information on shark behavior is better encrypted: it cannot be reconstructed without access to the hidden state of private cards. Integrative information processing affects not only one's own strategic behavior, but the ability of others to predict it. By characterizing the informational structure of complex strategic interactions, we offer a detailed account of how experts extract, process, and conceal valuable information in high-uncertainty, high-stakes competitive environments.