Early Outcomes and Future Risk-taking: Evidence from a Large Gambling Provider

Jan Hanousek (), Jan Hanousek (), Jakub Mikulka () and Jared Williams ()
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Jan Hanousek: Fogelman College of Business Economics, University of Memphis, United States of America
Jan Hanousek: Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czech Republic; CEPR, London, UK
Jakub Mikulka: CERGE-EI, Prague, Czech Republic; Charles University, Prague, Czech Republic; Academy of Sciences, Prague, Czech Republic
Jared Williams: University of South Florida, United States of America
Authors registered in the RePEc Author Service: Jan Hanousek

No 2023-90, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: We examine how people’s risk attitudes are affected by prior outcomes using an extensive dataset consisting of over 45 million sports bets placed by over 100,000 customers across seven years. We find that past successes increase future risk-taking, and we show that most (77-84%) of this effect is driven by the house money effect, while the rest (16-23%) is driven by risk-takers updating their beliefs about their ability. Finally, we provide evidence that risk-takers appear to have very short memories – only very recent successes are strong predictors of future risk-taking.

Keywords: risk attitudes; house money effect; near-miss effect; sports betting (search for similar items in EconPapers)
JEL-codes: C31 D90 G41 Z23 (search for similar items in EconPapers)
Pages: 34
Date: 2023-12
New Economics Papers: this item is included in nep-spo
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