Prospect Theory and the Favorite Long-Shot Bias in Baseball

Journal Article · 16 May 2023 · Risks

DOI: https://doi.org/10.3390/risks11050095 · OSTI ID:1995696

Nutaro, James J.  ^[1]

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1. Oak Ridge National Laboratory (ORNL), Oak Ridge, TN (United States)

We provide new evidence of a favorite long-shot bias for bets placed on baseball games. Our analysis uses the difference of mean run differentials as an observable proxy for the probability of a team to win. When baseball is viewed through this proxy, we see that bettors believe favorites are less likely to win than they actually are and long-shots more likely. This result is consistent with prospect theory, which suggests that large and small probabilities are poorly estimated when making decisions with risk.

• Research Organization: Oak Ridge National Laboratory (ORNL), Oak Ridge, TN (United States)
• Sponsoring Organization: USDOE Office of Science (SC)
• Grant/Contract Number: AC05-00OR22725
• OSTI ID: 1995696
• Journal Information: Risks, Journal Name: Risks Journal Issue: 5 Vol. 11; ISSN 2227-9091
• Publisher: MDPICopyright Statement
• Country of Publication: United States
• Language: English