It's a Sure Win! Experimental Evidence on Overconfidence In Betting Behavior

40 Pages Posted: 4 Dec 2023

See all articles by Martin Chegere

Martin Chegere

University of Dar es Salaam

Paolo Falco

University of Copenhagen - Department of Economics; Stanford University

Marco Nieddu

Università degli Studi di Cagliari

Lorenzo Pandolfi

University of Naples Federico II

Mattea Stein

University of Naples Federico II

Abstract

As sports betting is surging worldwide, so are concerns about excessive gambling. To explore the drivers of sports betting, we conduct an experiment investigating how regular sports bettors in urban Tanzania value bets and form expectations about winning probabilities. We find that subjects assign higher certainty equivalents and winning probabilities to sports bets than to urn-and-balls lotteries with identical odds, even though they are not more likely to win. Coupled with novel survey data on betting frequency and motives, our experiment suggests that, by leveraging gamblers' overconfidence in their ability to predict sports outcomes, sports betting can exacerbate financial losses.

Keywords: betting, overconfidence, expectations, framing

Suggested Citation

Chegere, Martin and Falco, Paolo and Nieddu, Marco and Pandolfi, Lorenzo and Stein, Mattea, It's a Sure Win! Experimental Evidence on Overconfidence In Betting Behavior. Available at SSRN: https://ssrn.com/abstract=4653121 or http://dx.doi.org/10.2139/ssrn.4653121

Martin Chegere

University of Dar es Salaam ( email )

P.O. Box 35046
Dar es Salaam
Tanzania

Paolo Falco (Contact Author)

University of Copenhagen - Department of Economics ( email )

København
Denmark
+4535334817 (Phone)

Stanford University ( email )

Stanford, CA 94305
United States

Marco Nieddu

Università degli Studi di Cagliari ( email )

Italy

Lorenzo Pandolfi

University of Naples Federico II ( email )

Naples
Italy

Mattea Stein

University of Naples Federico II ( email )

Naples
Italy

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