Hedging one’s happiness – Should a sports fan bet on the opponent?

Stellenbosch Working Paper Series No. WP20/2011
 
Publication date: 2011
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

This paper sets out to show that a risk-averse sport fanatic could hedge his happiness by betting on the opposition. The literature surrounding happiness, risk- and loss aversion is explored and a model is developed to explain the happiness a fan derives from a match. It is shown that expectation as to what the result may be plays a vital role in the emotions awakened. An upset victory is much sweeter than one where one’s team is the outright favourite. Expectations determine the odds offered by bookies. Here lies the beauty of this strategy. Suffering an unexpected loss is more painful than an anticipated beating. That being said, the payout from betting on the underdog opposition (which subsequently won) would be larger the more unexpected the result was. To bet on the opposition to hedge one’s happiness appears to be a plausible strategy for an economically risk-averse sports fan – especially if one supports the odds-on favourite.

 
JEL Classification:

D81, D84

Keywords:

Happiness, Sports betting, Risk aversion, Loss aversion

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27 September 2021
Besides the escalating woes at leading Chinese property group Evergrande, global and domestic financial markets were focused on a slew of central bank policy meetings last week. ...

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