Bytes and Bets: How Online Forums Shape Risk Attitudes and Returns

Abstract

Online forums offer users a virtual space with low costs to exchange rich information with diverse individuals. However, their impact on decision-making remains uncertain—whether they help or harm users depends largely on the representativeness of the information, as online forums can contain misleading or exaggerated content designed to attract attention. In this paper, we examine how consumption of online forum information affects decision makings and their outcomes, with a unique setting of online sports betting --- where gamblers’ betting decisions are directly linked to financial outcomes and heavily influenced by game information and other gamblers’ opinions. We study how information from online forums affects bettors’ risk attitudes, gambling behaviors, and financial returns. Our analysis suggests that greater exposure to forum content encourages risk-taking but does not necessarily improve financial outcomes. For every additional post a bettor reads, a bettor’s wager amount rises by 7.54%, while net returns decline by 87 cents. Further analyses reveal that the information shared on online forums is biased toward high-risk events --- the betting odds shared on forum posts are often much higher than the overall betting odds and therefore are not a fair characterization of how other bettors evaluate gambling risks. Relying on this biased information can potentially skew information seekers’ perceptions and lead them to place riskier bets with lower likelihoods of success. We further find that this bias likely stems from the fact that extreme bets attract more attention, motivating forum contributors to post wagers with lower chances of winning.