What follows is a quote from the Dictionary of Word Origins by Linda and Roger Flavell. I've broken down the paragraph to a point-by-point to make it easier to aprehend the sequence of play.
"Handicap is a contraction of the phrase hand in the cap or hand i' cap. This was a game of chance based on bartering.
One person would challenge another for a particular posession and offer something of his own in exchange. If the challenge was accepted an umpire would be appointed and all three would place forfiet money into a hat, keeping their hands in the cap.
The umpire would then consider the value of the proposed articles and decide what extra payment should be offered by the owner of the inferior item to make the exchange fair.
The two players then withdrew their hands; holding onto one's money indicaated that the deal was off, an empty hand signalled acceptance.
If both players were in agreement, the exchange was made or cancelled accordingly and the umpire took all the forfiet money.
On the other hand, if the players disagreed, no exchange was made but the one who had indicated a willingness to trade took all the forfeit.
The game is an old one. It is described in the Middle English poem 'Piers Plowman' where a hood is offered for a cloak, the noumpere (umpire) judging that the owner of the hood should also give a cup of ale. In the fourteenth century, however, the game was known as Newe Faire. The name hand in the cap is of later date and is not found in written records until the seventeenth century. In his diary entry for 18 September, 1660, Samuel Pepys calls the game handicap, adding that he has never heard of it before but that he enjoyed playing it immensely."
This game makes me think of a bunch of things.
A storygamy resolution system, it almost sounds like it was designed by Vincent Baker. I'm wondering now if you could create an in-game D&D gambling system with it. But the issue of who would be the umpire might be difficult. You are either playing against a DM character with the DM or a player or PC as the umpire, or possibly playing pvp with the DM as the umpire.
A surprisingly morally-sophisitcated yet ultra-simple decision system for exchanging goods. It reminded me of the Native American potlatch game. I suspect it is very old, probably much older than its first record in Piers Plowman.