CEU Economic Seminar Series: It's a Sure Win! Experimental Evidence on Overconfidence in Betting Behavior

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.