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The Magic of the Game:Experimental Evidence on Sports Betting Behavior

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Abstract

As sports betting is surging worldwide, so are concerns about excessive gambling. To explore the drivers of this phenomenon, we conduct an experiment investigating how regular sports bettors in urban Tanzania value sports 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, in fact, they are not more likely to win. We complement the experimental evidence with original survey data on sports betting frequency and motives. Overall, our results suggest that systematic misperceptions of the risks and returns associated with sports betting may contribute to its booming popularity.

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  • Martin Chegere & Paolo Falco & Marco Nieddiu & Lorenzo Pandolfi & Mattea Stein, 2022. "The Magic of the Game:Experimental Evidence on Sports Betting Behavior," CSEF Working Papers 655, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 15 Nov 2024.
    • Handle: RePEc:sef:csefwp:655
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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