Behavioral Considerations In Financial Decisions: Betting Against The Spread In Sports

Abstract

People often choose intuitive rather than equally valid non-intuitive alternatives. This research suggests that these intuitive biases arise because intuitions often spring to mind with subjective ease, and the subjective ease leads people to hold their intuitions with high confidence. An investigation of predictions against point spreads found that people predicted intuitive options (favorites) more often than equally valid (or even more valid) non-intuitive alternatives (underdogs). Critically, though, this effect was largely determined by people’s confidence in their intuitions (intuitive confidence). Across a naturalistic sample, it is found that decreasing intuitive confidence reduced or eliminated intuitive biases. This finding indicates that intuitive biases are not inevitable but rather predictably determined by a contextual variable that affects intuitive confidence.