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It’s a Sure Win! Experimental evidence on overconfidence in betting behavior

Martin Chegere (), Paolo Falco (), Marco Nieddiu (), Lorenzo Pandolfi and Mattea Stein
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Martin Chegere: University of Dar es Salaam
Paolo Falco: University of Copenhagen
Marco Nieddiu: University of Cagliari

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We conduct an experiment with regular sports bettors in Tanzania to investigate how they value their bets and form expectations about winning probabilities. By comparing a sports bet to a neutral urn-and-balls lottery with identical odds, we find that subjects under the sports framing assign higher subjective values (certainty equivalents) to their bets and are significantly more optimistic about their chances of winning, even though, in fact, they are not more likely to win. This is consistent with bettors being overconfident in their ability to predict sports outcomes. Coupled with data on betting frequency and motives, our results suggest that, by leveraging gamblers’ overconfidence, sports betting magnifies their financial losses.

Keywords: betting; overconfidence; expectations; framing; sports. (search for similar items in EconPapers)
JEL-codes: C91 D84 D91 L83 (search for similar items in EconPapers)
Date: 2022-11-17
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-spo
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