Sports Betting and the Shawshank Redemption.

By John Considine

The Shawshank Redemption seems to feature regularly amongst the favourite movies of sports people.  The story of a person overcoming the odds that seem unfairly stacked is the theme of many a sports book (it can even feature in economics books as a previous blog post on this site demonstrated).

When it comes to sports betting it seems sports fans also seek to overcome the odds.  A recent article in European Sport Management Quarterly warns fans/supporters against betting on their favourite team.  The article is written by Sangwon Na, Yiran Su, and Thilo Kunkel.  Their bottom line is that fans lose money when betting on their favourite team.  Using data from betting on the German Bundesliga the authors test for the extent of fans' "errors" or "biases".  One set of their results is reproduced in the picture below.

Citing previous literature, the authors note that "highly identified fans exhibit greater bias in their evaluation of their teams than fans with lower team identification".  The words "bias" and "evaluation" suggest errors.  However, there are other perspectives.  One could say that that more committed supporters spend more money on their team in the betting shop.  Viewing the bet as a consumption decision rather than an investment decision should be considered.  More committed supporters probably also spend more buying replica kit in the club shop.  Should we warn supporters against buying replica kit?

The title of the article is "Do not bet on your favourite team ...".  The literature cited within is impressively broad.  Of particular interest are some of the frameworks and concepts more frequently used in psychology and sociology.  One of the articles cited examines fans' predictions regarding their team and the remaining 15 NFL teams.  The data in this paper by Cade Massey, Joseph Simmons and David Armor did not require the fans to wager their money.  Instead prizes were offered for predictions.  The predictions from this paper are reproduced in the picture below.

It is clear that the fans appreciate that for every winner there is a loser.  But there is a clear bias when it comes to their favourite teams.  The authors call it optimism.  But is it?  It is not the case that sports fans always look on the bright side of things.  NFL fans may have optimism when it comes to the likelihood of success but they also tend to believe that the odds are stacked against their team.  This was illustrated by a 2016 article by Shai Davidai and Thomas Gilovich.

Davidai and Gilovich examined the perspective of NFL fans when the schedule for the season was released.  How did the fans perceive the schedule for their team?  Was the schedule favourable (tailwind) or was it unfavourable (headwind)?  Twice as many fans saw the schedule as unfavourable as illustrated in the picture below. 

The above picture is hardly a representation of optimism.  However, it does feed into a narrative of having to overcome the odds to succeed.  Fans overestimate both the difficulties of the task and the chances of success.  A strange combination.  Unless one is constructing a heroic story.