The brain and betting: Anchoring bias makes you rely too heavily on the first information you were exposed to when making decisions.
The human mind is far from perfect when processing information. Psychologists have found that people treat the first piece of information they learn on a specific subject as more valuable and trustworthy than subsequent pieces, even though the first information might be wrong or misleading.
This is known as anchoring bias or the anchoring effect and it affects everyone in many different situations, including the process of selecting and placing sports bets.
A cognitive bias is, according to Wikipedia, a systematic pattern of deviation from norm or rationality in judgment. Thus, humans tend to make decisions or take action based on irrationality. In the article series “The brain and betting” Netbots Norway explore these cognitive biases and how they might affect decision making in gambling.
Background information on anchoring bias
The famous psychologist, economist and best selling author Daniel Kahneman has, along with other academics, conducted several studies documenting the anchoring effect.
According to Wikipedia, in one of the first studies on the subject one half of participants were given five seconds to estimate the answer to 8x7x6x5x4x3x2x1. The other half were given five seconds to estimate the answer to 1x2x3x4x5x6x7x8.
You are obviously a smart enough reader to figure out that the answer to these two multiplications must be the same (40,320).
However, the participants who were given 8x7x6x5x4x3x2x1 estimated that the answer was 2,250 on average. The participants who were given the reverse sequence estimated that the answer was 512.
Apart from showing that the human mind is not very good at multiplying multiple numbers, it it was made clear that participants who saw 8×7 first in the sequence ended up with four times higher answers than the ones who saw 1×2. This was put down to anchoring bias, as quickly multiplying 8×7 results in a big number while multiplying 1×2 suggests a small number.
Did Gandhi die at age 9 or age 140?
In another study two groups of students were given information “anchors” that were obviously wrong. One group was asked whether Mahatma Gandhi died before or after age 9, the other group before or after age 140.
Both groups must have realised that the information provided (age 9 / age 140) was misleading, but they still fell victim of anchoring bias when asked to estimate his age of death. The group who was presented with the age of 9 information guessed an average age of 50, while the other group (presented with the age of 140) guessed 67. This shows that the anchoring effect affects decision making even when the anchor information obviously is false.
The first piece of information received provides a foundation for further analysis which is hard to ignore, even though the information has little or no value.
First impressions that last
“You never get a second chance to make a first impression” goes the saying, a quote that has been attributed to both the poet Oscar Wilde and the actor Will Rogers. Hello anchoring bias!
The brain likes to sort and categorise information really quickly, and that impression sticks even though it might not be correct.
Anchoring and negotiations
This bias could affect how much you are willing to pay for a used car, a property or how you negotiate salary with a new boss. Research suggests that making the first offer is an advantage as the anchoring effect puts some added importance to the starting number, guiding all subsequent counteroffers.
Multiple studies have shown that the initial offer has a stronger influence on the outcome of negotiations than the subsequent counteroffers.
Anchoring bias and sports betting
Betting on odds is like a negotiation with the bookmaker, and usually the bookmaker makes the first move. In a betting context the odds from the bookmaker on a certain event might influence how sports bettors judge that event, writes betting analyst Joseph Buchdahl.
Only a small percentage of gamblers calculate their own probabilities on the outcome of sporting events. The majority looks at the odds prices quoted from the sports betting firms, meaning that the anchoring bias could influence the decision process that follows when deciding whether to bet on that match.
As an example, let’s look at a sporting event with only two possible outcomes; such as a tennis match. Let’s say that Timmy Tennis plays Simon Serve in the Wimbledon final.
Since this is an example, we allow ourselves the luxury of knowing the true chance of each player winning the game. Let’s assume that Timmy and Simon are tennis players of absolutely equal ability, each having a 50% chance of winning a game against the other.
Thus, the true odds for each of them winning is 2.00. (Fractional odds: 1/1. US Moneyline: +100). Even so, the bookmakers price Timmy Tennis to win at 2.45 and Simon Serve at 1.69. (The bookmakers overround/margin/commission/juice/vig has been neglected for this example.)
Since we have the luxury of knowing that each player’s true chance of winning is 50% (true odds 2.00), it is clear that the 2.45 offered on Timmy Tennis is a massive value bet, while the 1.69 offered on Simon Serve is a disaster. However, due to the anchoring bias and the initial odds offered of 2.45 many sports bettors, even the informed ones, would falsely believe that Timmy Tennis has significantly lower chances of winning the match than Simon Serve.
Long-term anchoring in sports betting
Odds prices are not the only pieces of information that can fool us. Anchoring bias is an ongoing challenge.
Let’s say you watch, on your flat screen TV, the Spanish football team SD Huesca play their first league game of the season. They play at their very finest, looking like the (unlikely) love child of Barcelona and Real Madrid. SD Huesca thump home a glorious 5-0 victory, securing three points and leaving you with the impression of a truly great team.
10 league rounds later, Huesca are at the bottom of the league table. You have lost multiple bets and mucho dinero (lots of money) betting on them. Even with a trash can full of losing betting slips, because of that first great league match you witnessed from Huesca you are still struggling to digest that they are a mediocre side 95% of the time.
This type of anchoring bias happens both with individual athletes and sports teams.
Anchoring and staking
Anchoring can also affect staking strategies. According to former sportsbook manager Adam Chernoff, bettors get anchored to their initial bookmaker deposit amounts or all-time bankroll high and make all of their bets in accordance to that specific number.
This means that bettors who started with a $1000 payroll and lost half of it (leaving them $500) behave differently than people who started with a $500 payroll. It is simply hard to adjust.
How can you avoid anchoring?
Studies have shown that even experts in a field fall victim to anchoring. However, just being aware that the anchoring bias exists can help in minimising its effects. It can even give gamblers and bookmakers an advantage.
Anchoring and other cognitive biases also illustrate how important odds modelling and prediction systems are. A computer is not affected by cognitive biases and can treat statistics and information in a way that removes any bias when betting. Rule-based strategies, machine learning and artificial intelligence can provide an edge when betting, eliminating any shortcomings in the human mind.
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Content and Social Media Manager
Lars Dybwad has a passion for sports betting and worked for five years as the “betting expert” in Dagbladet, Norway’s second largest newspaper. Dybwad is not a native English speaker and hopes you find his command of the English language charming rather than annoying.