Betting psychology - cognitive biases - irrational escalation
Bookmakers make plenty of money off of gamblers that make poor decisions. When one does research into why exactly the bettors are losing, the results are not so clear. In this part of our betting psychology articles we will take a closer look at one of the reasons why bettors are making poor decisions, namely irrational escalation.
What is irrational escalation
Irrational escalation is a term often used in psychology, philosophy, and economics. Similar terms such as escalation of commitment are also used in politics, business, and other areas. In military strategy these terms have been used to explain United States' continued commitment in wars such as Vietnam (in the 1960s and 1970s) and Iraq (in the 2000s), see for instance the article "The Sunk-Cost Fallacy". The common element in all these terms is that irrational decisions about new investments are being made and justitied on basis of previous investments, even if it is likely that the new investments are not worth it given the excected outcome. Quotes such as "in for a dime, in for a dollar" and "throwing good money after bad" also derive from irrational escalation. The investments we refer to may be money (continued investments are made to try to justify and/or recover previous investments), but in can also be time and even human lives.
Irrational escalation in betting
The most well-known example of irrational escalation in betting is in poker and when you as the player becomes 'pot committed'. By this we mean that the funds you have already invested in the pot are making you stay in the pot and continue betting, even when you objectively should fold your hand. In sports betting there are many examples too, "in for a dime, in for a dollar" is one of the phrases that come first to mind. Very often you see bettors that start out placing small and disciplined bets, but after losing some bets they increase the stakes (the dime becomes a dollar), and bet size and often also bet selection are then being justified on the basis of previous lost bets (sunk cost) instead of based on odds value estimate and money management system. Irrational escalation can play a role also for bettors that are winning, for instance if you continue betting or increase the stakes because you have been winning more than usual lately. Of course, there will be times when it is correct that you should continue betting and/or increase the stakes - but make sure you do it for the right reasons and not only because of previous bets. Another example is when you spend a lot of time researching a match without finding a proper value bet. In many cases you would spend even more time looking at the match, because you had spent so much time already that it seemed like a waste to not have found a bet yet (the thought being that there must be a good bet here just as long as you spend enough time searching for it). And in the end you will often place a bet, maybe feeling proud that all the research finally paid off, but subconsciously your bet value estimates have been influenced by the time investment made into research, and the value bet you found in the end was the type of bet you would have dismissed if you were only 30mins into the research.
As a general rule, before placing bets you should take a step back and really look at the big picture. Is your bet and bet size in line with the money management system you are using? And is your bet a value bet on its own, based on the information you have available and without any justification of previous investments? By asking these questions you should be able to avoid irrational escalation.
We know that avoiding the pitfalls of the various cognitive biases is easier said than done, but we hope these articles are helpful to you, and make sure you read all of our other psychology related articles.