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Early Outcomes and Future Risk-taking: Evidence from a Large Gambling Provider

Author

Listed:
  • Jan Hanousek Jr.

    (Fogelman College of Business Economics, University of Memphis, United States of America)

  • Jan Hanousek

    (Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czech Republic; CEPR, London, UK)

  • Jakub Mikulka

    (CERGE-EI, Prague, Czech Republic; Charles University, Prague, Czech Republic; Academy of Sciences, Prague, Czech Republic)

  • Jared Williams

    (University of South Florida, United States of America)

Abstract

We examine how people’s risk attitudes are affected by prior outcomes using an extensive dataset consisting of over 45 million sports bets placed by over 100,000 customers across seven years. We find that past successes increase future risk-taking, and we show that most (77-84%) of this effect is driven by the house money effect, while the rest (16-23%) is driven by risk-takers updating their beliefs about their ability. Finally, we provide evidence that risk-takers appear to have very short memories – only very recent successes are strong predictors of future risk-taking.

Suggested Citation

  • Jan Hanousek Jr. & Jan Hanousek & Jakub Mikulka & Jared Williams, 2023. "Early Outcomes and Future Risk-taking: Evidence from a Large Gambling Provider," MENDELU Working Papers in Business and Economics 2023-90, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:90_2023
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    risk attitudes; house money effect; near-miss effect; sports betting;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • Z23 - Other Special Topics - - Sports Economics - - - Finance

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