Risk and Reward in Betting Psychology: How South African Punters’ Decisions are Shaped

Understanding Risk and Reward Psychology

Psychology of risk and reward analyses how we perceive uncertain events, because emotionally experiencing an exciting potential win is usually much more powerful than logically understanding the odds that it will not happen. Your brain will not register "gain of ZAR400" and "probability of 25%" as two balanced statements. Your attention is grabbed by the amount you could win, and the inevitability of losing soon becomes background noise. While certainly prevalent in sports betting, this misrepresentation of risk versus reward exists in all scenarios of uncertainty (including stock market investments, among others), but is mainly seen with immediacy and rapid trades.

Why People Keep Betting Despite Losses

Bettors continue even after multiple losses because several biases reinforce each other. Loss aversion means that a loss of ZAR500 hurts more than a win of ZAR500 cheers you up. It creates the desire to get your money back as soon as possible. The sunk cost fallacy leads a gambler to feel that money already lost should motivate them to place one more bet. The illusion of control tricks someone into believing that by studying form or selecting their own horses, they can affect an outcome ultimately governed by randomness.

Most powerfully, intermittent reinforcement ensures the behaviour is repeated. Rewards that do not come after every bet but instead arrive intermittently (the odd winning multi hidden amongst dozens of losers) reinforce the behaviour far more strongly than constant returns would. One short sequence of three near-misses followed by one heavier loss warps memory: our brains remember near-misses as "almost won" which builds up false confidence, while the single large loss is remembered as bad luck instead of solid evidence you are losing.

Cognitive Biases in Risk and Reward Judgement

Several cognitive biases cause people to misinterpret risk and reward. Every bias is associated with a common betting situation. Here's how the most prevalent manifest themselves.

• Overconfidence: Believing your successful rugby weekend was skill, instead of variance.
• Confirmation Bias: Seeking out information that agrees with your pre-match thoughts about a Springboks fixture, for example.
• Gambler's Fallacy: Thinking teams are "due" for a break in unwanted outcomes after five-match losing streaks.
• Near-Miss Effect: A four-leg accumulator losing on the last leg feeling so close to winning leads to trying another.
• Recency Bias: Focusing too much on the previous weekend's results instead of the whole sample of the season.
• Availability Bias: Believing an upset is more likely just because you can remember one shock.
  

How Bettors Misjudge Expected Value

Expected value (EV) tells you what the average result of a bet would be if you could repeat it many times, taking each possible outcome and weighing it by how likely it is to occur. To put it simply, EV answers the question of whether a price is generous or stingy in the long run. Psychology comes into play because salience of reward makes the gross return more visceral than loss frequency.

The example below illustrates how that matters.

• A bookmaker offers you a cricket market at 2.20, when the true odds are more like 2.50.
• If you bet at 2.20 you are paying more than the result is worth, so despite the generous payout, the expected value is negative.
• ZAR100 at stake at that price means ZAR120 profit. That number jumps off the page at you.
• Long term advantage and frequency of loss are abstract in comparison, so they mean far less when you decide.
• The potential for profit is distorted when it overshadows the odds against winning.
  

Responsible Gambling Support for South African Punters

Problem gambling support is closer than you think. Even if gambling with a bookmaker without a South African licence, the South African National Responsible Gambling Programme can still provide free, confidential counselling and a national helpline number for South African residents who want it.

International bookmakers are not included in South Africa's national self exclusion programme, which creates two levels of safety net when it comes to practical applications. International support organisations such as GamCare, BeGambleAware and Gambling Therapy all offer free counselling services, self-tests, and self-exclusion lists. This is vital to keep in mind if your bookmaker holds an offshore betting licence. When it comes to the betting itself, nearly every large offshore operator will offer responsible gambling tools right on their website. These can include deposit limits, loss limits, session time-outs and self-exclusion of your account.

Conclusion: Managing the Psychology of Risk and Reward in Sports Betting

Betting psychology involves three processes happening simultaneously: cognitive biases that incorrectly price risk, reinforcement sensitivity that skews perception of payouts, and loss-chasing behaviour. Improved results can be achieved by staking according to plan in rand, accurate assessment of implied probability (decimal odds), and making use of support mechanisms at the earliest opportunity should you feel you are losing control.