Before anything else, you might be wondering what behavioral economics is. It is a theory about making people believe how traditional economic concepts work in the real world. Then, we will discuss how you can apply it when wagering on sports.
Another term you need to know is the efficient market hypothesis. It is the theory that any market will go towards a point where prices are correct. As a result, the price on the market becomes its actual value that is not under- nor over-estimated.
If EMH is correct and odds show the actual value, then it is impossible to earn profits through sports betting in the long run. However, your luck has a role in your earnings instead of skill. Of course, sports forum users can argue about both sides, but it is not the point of the tutorial.
Behavioral Economics in Sports Betting
According to sports news coverage, pricing the results is a complex and challenging process. Even if a bookie knows the true probability, the specific game’s odds could differ from the market. As a result, the bookie needs to follow the market price to avoid being at a disadvantage. Bookies try to guess what other bookies thought is the correct price and try to match it.
Players can assess the odds through behavioral economics. Also, it debunks the EMH. For instance, players can limit the use of money in an efficient way. So people look for bargains that many consumers purchase items because of the discounted price instead of necessity.
So, how does everything tackled above related to sports betting? For one, betting because the odds look good is not a profitable strategy. Instead, it would be best if you tried to find value and assess your risks first before placing a bet.
Also, the idea of players on the market betting in a rational manner is inaccurate. There are many instances in which players use their emotions without analyzing the market first. As a result, the market moves, and the odds become untrue value.
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