Friends of the Behavioral Economics Club, this week we present the paper “Behavioral Economics: its influence on the prediction of sports results” by Pérez-Martínez, A. and Rodríguez-Fernández, A. (2022), in which authors carry out a study to identify which biases appear when it comes to predict sports bets’ results, specifically, of soccer matches.
There are some economic theories that establish that humans have the ability to correctly analyze the probabilities and benefits of each alternative when making decisions of any nature. Therefore, it is assumed that we will opt for the option that generates the best results for us. However, the rational character of the human being has always been overestimated in economics throughout its history.
Behavioral economics is an evidence-based discipline that focuses on the conditions and characteristics of economics that are uniquely human.
Behavioral economics understands that the vulnerability of the human mind is related to multiple contemporary social problems. The uncertainty under which decisions are made generates a significant risk that influences the processing of information. The main contribution of behavioral economics is the discovery of a series of determinants that influence the final decision made by the human being.
These determinants are heuristics and cognitive biases. It is important to recognize that all human beings sometimes act influenced by cognitive biases, and these are therefore predictable to some extent. Information processing capacity is limited, as well as concentration and attention. For this reason, errors are not random, but the result of heuristics or cognitive biases, mental shortcuts, which is the primary function of these mechanisms.
One area where insights from behavioral economics have been applied is sports bets. The prediction of the results of the bets is considered a rational process, which depends on the experiences, experiences, and the information that the person has at the moment of generating this prediction.
However, reality points to the diversity of alternatives, questioning the supposed rationality.
The objective of the research is to analyze the presence of cognitive biases that affect the prediction of sports bets’ results. In other words, it aims to demonstrate the influence of these biases.
The scientific ideas that authors propose to contrast are based on behavioral economics theory and are as follows: first, people tend to vary their preferences when the information they know about the sporting situation increases; on the other hand, intuitive thinking, optimism biases, the representativeness heuristic, overinference, the hot hand and small numbers, will be biases that will appear in people’s decision making in this context.
To find out whether these hypotheses are true, an experiment was carried out with students from universities in Latin America. In total, 66 young people participated.
They were asked a series of assumptions, all related to soccer, and with predictions about the results of different matches. The basic idea of all of them was to predict which of the two teams would finish first in the league knowing the results of the previous matches and making a series of quick calculations on the points achieved.
The experiment shows that it is not possible to predict people’s decisions with a high degree of reliability, due to the existence of multiple criteria that subjects use to determine their prediction.
However, the presence of some biases was observed, which corroborates the theory of behavioral economics.
For example, the overinference bias appeared. That is, an assumption about the impossibility of manifesting a result that has not appeared, or maintaining one that has been obtained. This bias would appear when it is considered that the team that has won most of the time, will be the team with the most chances of winning in the future; just like winning will be more likely than drawing.
The bias of excessive optimism also appears, which would be the strategy of positively distorting the expectations of the future. Among the reasons for the presence of this bias is that it occurs because people do not review their preliminary assessments sufficiently after obtaining new information, and do not realize to what extent their estimates are wrong.
Emotional elements also influence, since one will have a more optimistic opinion of the team he/she is a fan of.
Other equally interesting biases appear that can be consulted in the original article.
It can be concluded that, indeed, sports predictions operate under the principles of limited rationality and behavioral economics analysis techniques can be successfully applied.
If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.
