[[{“value”:”Corrective policy in sports betting markets is motivated by concerns that demand may be distorted by behavioral bias. We conduct a field experiment with frequent sports bettors to measure the impact of two biases, overoptimism about financial returns and self-control problems, on the demand for sports betting. We find widespread overoptimism about financial returns. The
The post Are sports bettors overly optimistic? appeared first on Marginal REVOLUTION.”}]]
Corrective policy in sports betting markets is motivated by concerns that demand may be distorted by behavioral bias. We conduct a field experiment with frequent sports bettors to measure the impact of two biases, overoptimism about financial returns and self-control problems, on the demand for sports betting. We find widespread overoptimism about financial returns. The average participant predicts that they will break even, but in fact loses 7.5 cents for every dollar wagered. We also find evidence of significant self-control problems, though these are smaller than overoptimism. We estimate a model of biased betting and use it to evaluate several corrective policies. Our estimates imply that the surplus-maximizing corrective excise tax on sports betting is twice as large as prevailing tax rates. We estimate substantial heterogeneity in bias across bettors, which implies that targeted interventions that directly eliminate bias could improve on a tax. However, eliminating bias is challenging: we show that two bias-correction interventions favored by the gambling industry are not effective.
That is from a new paper by Matthew Brown, Nick Grasley, and Mariana Guido. Matthew Brown is a job market candidate from Stanford, and has a very interesting broader portfolio.
I do not, by the way, favor a ban on sports betting, but it is worth asking, when appropriate, what is the utilitarian cost of one’s libertarianism. On this particular issue, I would say “rising!”
The post Are sports bettors overly optimistic? appeared first on Marginal REVOLUTION.
Economics, Sports, Uncategorized
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