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Cognitive bias in gambling

  1. May 25, 2010 #1
    Do people prefer getting odds to laying odds? That is, when people gamble, do they prefer to risk a little for the chance to win a lot, rather than vice versa? I know from personal experience that you can get a little rush from putting quarters in a slot machine, inspired by the possibility that one lucky quarter might make you hundreds or even thousands of dollars richer. Even knowing that you are losing a few cents on average for every quarter you bet doesn't keep that feeling of excitement and anticipation away. The large potential payoff, even though it is smaller than what the true odds require for a fair game, is enough of a carrot on a stick to lure you along.

    But then it seems that other gamblers prefer to lay odds, whether or not they know that's what they are doing. The "system players" at roulette or other table games usually play in such a way that makes it likely that they will come out ahead a small amount. But they are risking the possibility that they run into the maximum bet or run out of money before they complete whatever sequence they are going for. This may happen less frequently, but when it does it will cost them more than what they usually win. So they are effectively laying odds, or betting a lot to win a little.

    Does this mean there is no general rule about which kind of gambling people prefer? Or can you break it down by situation and predict whether people will prefer taking odds to laying them?
     
  2. jcsd
  3. May 25, 2010 #2
    A bit of both, I believe. I think it mainly depends on the person- I hate gambling, and usually refuse to do it (unless it's family poker) because it's so dumb.
     
  4. May 25, 2010 #3
    Heh. Well, at least you don't have to worry about developing a costly vice. Gambling on games that require skill (such as poker, played with non family members) can be lots of fun, though. And it doesn't have to be a losing proposition like it is at the casino.

    My question mostly pertains to games of pure chance. But it also pertains to proposition bets. For instance, suppose you are good at shooting freethrows in basketball, and the odds against you making three in a row are 2:1 (you do it once in three attempts on average). My question asks, is it easy to find people who will give you 2:1 or better odds on your money, or do you have to find some other proposition where you are the one laying odds and enticing them with a chance to win more money than they risk?
     
  5. May 25, 2010 #4
    1- my family is from the South. It takes much skill to beat them :tongue:

    2- It's all about the confidence in oneself- how cocky one is.
     
  6. May 25, 2010 #5
    It depends if the gambler is rational or irrational.

    A smart gambler will only play scenarios where she/he has a positive mathematical expectation/expected value: i.e. in poker games where is expectational win exceeds the cost of the rake/time charge. Then again, using time in this way has a perceived opportunity cost, in my mind.
     
  7. May 26, 2010 #6
    Good (professional) gamblers only play mathematically positive expectation. It also depends on the bankroll, if you have something with very high variance you wouldn't want to lay out a large portion of the bankroll. If you have something with lower variance you can afford to risk more.

    So basically good gambers will play high positive expenctation bets with low risk to the bankroll as an ideal. It doesn't matter if odds are laid or taken.

    You won't find a good gambler playing roulette or many casino games (apart from for fun) as every bet you make is methematically expected to lose you money.
     
  8. May 26, 2010 #7
  9. May 26, 2010 #8

    Thank you! The local library has that book. I will look at it when I go there tomorrow.

    I agree with what imiyakawa and xxChrisxx say about expectation. For a rational decision, whether you bet or not depends on whether the expectation is positive or negative. And if it is positive, how much of your bankroll you bet depends on your edge and possibly on the variance. It doesn't matter whether you are laying or taking. But I'm trying to understand what kind of biases humans have built into their minds that might affect their decisions.

    Personally, I think I am biased toward taking odds. I know biases do not happen on a rational level, but a rationalization of it would probably be something like, "What's the harm? If I lose, I only lose a little, and I might win big." On the other hand, the idea of laying odds puts a little knot in my stomach: "Sure, I know it's unlikely, but I'd hate to lose that much money when I can only win a little."

    Both of these biases lead to bad results, of course. The first one leads to throwing away money on bets with negative expecation, while the second may cause you not to take bets with positive expectation. I'm just wondering if my personal biases are common.
     
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