by Bryan B.S.
01 Jun 18
Human beings, although complex in many ways are easy to predict and manipulate in others. Cognitive biases are a factor that brands and advertisers have taken advantage of for decades to get more money out of the customer's pockets and now bookies can use them to increase their monthly income.
First, let us understand the concept of cognitive bias. This is when a person creates his own subjective reality based on their perception of an input. The person believes and accepts as correct the subjective reality that he creates leading to perceptual distortion, inaccurate judgment, illogical interpretation or irrationality.
Since the subjective reality creates by the person are not based on real facts the decisions he makes will end up being wrong.
To have a better grasp on the cognitive biases, and how to use them for the betting business, let us see an example:
The Underdog Triumph
In rare cases, weak teams manage to emerge victorious, which generates a lot of media noise. These stories of David against Goliath are loved by people and tend to create a cognitive bias. Take for example the case of Leicester City a relatively small British soccer club that has a value of $413 million. They manage to win the 2015/2016 Premier League against teams like Manchester City with a value of $2,083 million. The odds for Leicester to win the league were 5000/1 at the beginning of the season.
In the 2016/2017 season, the number of bets on small teams like Hull City to win the premier league increased substantially, thanks to the cognitive bias created by the Leicester win last season. Bookies benefited a lot from this because most of the teams that people bet on did not even manage to stay in the first division.
What was evidently an isolated event that hardly could be repeated, influenced players to make a bad betting decision.
Bookies that want to take advantage of cognitive biases have to identify situations like this where an unlikely result motivates people to believe that the result can be repeated, which encourages them to make bets that end up being beneficial for the bookie.