In a tournament setting, your chips change value as the game progresses. This might not make sense at first, but it is true. Let’s use the World Series of Poker as an example. When you first buy in to the tournament for $10,000, the chips you are given are worth $10,000. However, as you advance through the tournament and your chips wax and wane, the monetary value of them fluctuates. If you have $10,000 in chips and you are the second to last player left in the tournament, those chips are now worth almost $1 million since this is the prize money that is won with a second place finish.
The chips that you gain early in a tournament are not worth as much as the chips you lose. Think about this in terms of proportions. If there is $100,000 in prize money available, and there are ten players starting out with $10,000 each, chips start out being 1/10th of the total prize money, holding their true value of $10,000. As people leave the tournament, the chips will change in value. With five people left, $10,000 is now worth only $5,000 in chip value. Because the average amount of chips held by each player is now $20,000, or 1/5th of the total amount up for grabs, your $10,000 is now worth only half of what it once was.
The true value of your chips is related to the prize value that you are immediately capable of earning. If you have only $1 in chips remaining and you are the second to last player in a tournament with a second place payout of $500,000, that one dollar is worth just a shade more than $500,000. This is because of the fact that there is an extremely small chance that you could still win the tournament and take home the bigger prize. Remember the saying “all you need is a chip and a chair”? The implications of this statement are that given enough winning hands in a row, all you need to win a tournament is to be still alive in it. So if someone wanted to buy your seat for some odd reason, in order to get the true value of your chip, you would need to charge a minuscule amount more than half a million.
