The Longshot Bias Is a Context Effect

• 成果类型: Article
• 署名作者: Meyer, Andrew; Hundtofte, Sean
• 署名单位: Chinese University of Hong Kong
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4684
• 发表日期: 2023
• 页码: 6954-6968
• 关键词: utility preference; Decision Analysis; RISK; asset pricing; behavior and behavioral decision making

摘要

In nearly every betting market, gamblers overvalue the riskiest bets. This longshot bias is usually explained by a tendency to overweight low-probability events. We offer a novel explanation: contrast effects enhance the attractiveness of longshots because gambles presented in terms of their payoffs are easier to compare along the payoff dimension than along the probability dimension. Our analysis of historical betting odds suggests that contrasts between gamble payoffs can explain the longshot bias. Laboratory experiments confirm those contrast effects and show that the longshot bias disappears when gamblers consider bets in isolation or when winning probabilities are easier to compare.