Betting bias – How bookmakers make money because of our cognitive biases – part 5 – Anchoring
The next cognitive bias we are going to discuss is called anchoring. The anchoring bias is one of the main causes to why many sports bettors fail to objectively consider all relevant elements before placing their bets. Read this article to better understand how to avoid these biases when selecting your bets, and make sure you read our other psychology related articles!
The anchoring bias
Anchoring, or focalism as it is also called, is a type of cognitive bias that describes the tendency we have to rely too heavily, or “anchor”, on just one factor or piece of information when making decisions. The anchor is often set early and is based on the first information we learn about a subject, and there is a bias toward adjusting or interpreting other information to reflect the “anchored” information, thus affecting future thought process and decisions-making.
An example of anchoring in everyday life would be if we were going to buy a used car, and focused excessively on how many miles the car has and its model year in order to determine its correct value, instead of also taking into account its overall condition and how well it has been maintained.
Anchoring as a betting bias
Anchoring is quite similar to another cognitive bias that we have discussed, namely the framing effect. If we look back at the Man U-Chelsea example we wrote about for the framing effect, we can clearly see that the key injuries of Man U are relevant team news and that they increase the chances of a Chelsea win. But is this enough to warrant a bet? To go ahead with the bet only on basis of the injuries is a type of anchoring bias. Anchoring plays a crucial role in sports betting and is often the bias that explains why a sports bettor relies too heavily on one piece of information when placing his bets, and fails to consider properly the other relevant pieces. In this case with the Man U injuries, the news about the injuries set the anchor and all the other information is then interpreted to reflect the anchor. So when the bookies change their prices we interpret this only as a confirmation of the anchor and that the team news is very important (instead of considering the updated prices in relation to all other factors).
Another relevant element is called the anchoring and adjustment heuristic. According to this heuristic, a sports bettor will start with an implicitly suggested reference point (the “anchor”, such as the team news or the price on offer) and from this reference point make adjustments to reach his own estimate (estimated relevance of team news or estimated correct price). It is, in other words, the anchor that becomes the starting point for the decision-making, and the bettor makes incremental adjustments based on additional information. This type of process will often create problems for the sports bettor in reaching the correct decision, because the anchor (whether it is the news that several star players are injured and the team weakened, the market price, or the tipster saying the price should be 2.0 instead of 3.0) is not necessarily the correct starting reference and following this heuristic the bettor’s end estimate will in most cases be close to or at least highly influenced by the reference.
How to avoid anchoring and adjustment? That is easier said than done.. But if you know you want to bet on a specific match, try to make up your own mind about winning probability and correct price before you check market price, team news, and betting tips. Because once you know the market price, have read some betting tips or match previews with opinions about latest line-ups etc, the anchor has been set and it will be very difficult to make estimates that are 100% your own. And once you have gathered information about the match, always remember to take a step back and try to objectively evaluate all the information you have available.
Anchoring as a betting bias – end notes
The above example of sports bettors relying too heavily on team news and neither objectively assessing the value of the news nor taking the updated prices into proper consideration, is something that we see daily on our trading desks. The anchoring bias is one of the main reasons (together with the band wagon effect) why so many sports bettors, even though they mostly follow tips they read about, end up losing money while the tipsters they follow make money. We often see a tip on, for instance, a team to win at price 1.80. The tipster and various wiseguys and syndicate bettors manage to bet at this price, while the other sports bettors come in too late and place their bets after the price has been slashed to 1.50-1.60. If the tip was a value bet at 1.80, then most likely it is not anymore at 1.50!
As a punter looking for online betting tips you will be bombarded with “sure” tips motivated by “incredibly important” team news. One way of avoiding to focus excessively on team news and taking prices without value, is to look at when the tip or team news was published and how the market prices have moved since then. Unless you are very quick (usually less than 15-30mins), the bookies may have reacted already and the relevant team news have been included in the updated prices. And sometimes you will notice that the bookies first reacted to the tip/news by changing their prices, but then later gradually reverted to their original prices. This can indicate that the importance of the team news was hyped and that instead of following the tip you should re-evaluate all factors before placing your bet.
We hope you have enjoyed this article and that it will help you with your betting decisions, make sure you keep reading our future betting and psychology related articles!