Why Gamblers Prefer Risky Bets: The Longshot Bias Explained
The Longshot Bias has a Context Effect
Tags: CUHK Business School, Hong Kong, Consumer Goods & Services, Computing Technology
This study explores the “longshot bias,” where gamblers overvalue high-risk bets due to contrast effects between potential payoffs, rather than probabilities. Analyzing historical betting odds and running lab experiments, the research shows that comparing payoffs makes longshots more attractive, but when probabilities are easier to compare, the bias diminishes. This finding highlights how context shapes decision-making in betting markets. Applications of this research extend to understanding biases in investment and gambling.
IP Type or Form Factor: Discovery & Research; Software & Algorithm
TRL: 3 - proof of concept with needs validated
Industry or Tech Area: Retail & E-Commerce; Big Data Analytics & Simulations
