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Behavioral Economics in sports betting

Behavioral Economics in sports betting

Behavioral Economics in sports betting
Miroslav Trifonov

Added on 2019-11-11 19:08:47 from Miroslav Trifonov

Very often, when we bet on sports, we notice the fact that the favourite is not always the winner. In other words, when we see a low odds, we automatically see this as an opportunity for the team to win the match. In reality, things are different, and to find out exactly what is happening in practice, you can check below the behavioral economics of sports betting in the following lines.

We will try to explain how this affects the sports betting. Let's not procrastinate, let's move on to the topic.

Efficient Market Hypothesis


The efficient market hypothesis assumes that all financial market prices are correct and accurately calculated. The economic World has believed in this hypothesis for centuries. But what does it have to do with betting on football or any other sport? It is related, of course, read below.

If we use the efficient market hypothesis for betting, this should mean that the odds represent the true probability of a result adjusted for the bookmaker's margin. If this was true, then no one can enjoy long-term winnings from bets, or rather all winnings will be based not so much on skill but on luck. Yet this hypothesis has proven to be incorrect in many cases.

What are the odds?


Thinking realistically, we will come to the conclusion that even if a bookmaker is aware of the real probability of the result, it is very unlikely to evaluate it differently from the evaluation given in the common market. If it does, the risk of arbitrage on the Global market is huge, making them uncompetitive. In the world of betting, the true value depends on the result itself. All this raises the question "Are the odds true or not?"

What amount of money to set aside for sports betting?

The money you bet on can be calculated on the principle of pricing. The same principle can be used by bookmakers for the formation of odds and other indicators.

Pricing is primarily about anticipating what others find acceptable. An ideal way to learn people's opinions is a riddle in which they try to guess what two thirds of the average values of all indicators will be.

A popular betting site had released a version of such a guessing game, and the winner received a prize, of course. The winner appears to have been a "second-level" thinker, according to Richard H. Thaler, who recipient of the Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics.

If all numbers should be between 0 and 100 at random, then the average value would be 50, two thirds of which are 33 (this is the logic of a thinker - first level). And yet, if everyone did, the correct number would be two-thirds of what has already been obtained, which is 22, as a second-level thinker would continue to think.

Unconventional thinking can also lead to the number zero. Quoting the book "If and only if all participants assume zero, no one will want to change their assumptions."

Fair assessment

This logic has been refuted, as it is a key element in the assumption of behavioral economists, who also point to possible reasons. Thinking about mental "accounting" is quite stimulating. Mental "accounting" refers to behavioral characteristics that can lead to the best possible use of our money.

People tend to look for bargains, but they also dislike fraud and higher costs. We often buy certain items just because they are available at a better price, not because they are needed, which explains why "promotions" are so popular амонг bettors.

We also look at fraud differently. Sometimes people tend to take advantage of a cheap service, but then pay a lot of things at a high price. It's the same with betting - sometimes someone places a bet not because they are safe or at least well thought out, but simply because, say, there is a promotional offer for an event.

The other feature of mental accounting are the so-called. "Sunk" costs. For example, those who pay for a cable TV subscription tend to watch movies much more often just because they paid for it, but do not realize that they are wasting their time. This could be used in a more valuable way and watch TV only when they really need it.

Behavioral economics and betting

From betting point of view, one must be careful not to incur greater losses than those one can actually afford. Take, for example, a bet in which you predict who will win the Premier League in November. This should not limit you from betting on the victory of another team in February, given the new information you will have by then. But be especially careful if you lose. It is a common misconception for a player to bet a higher amount without considering the bet, just trying to "kill" the loss! So you can get carried away and make bets of value that you can't afford!