Everybody likes to cheer for the underdog, but hardly anyone bets on the underdog to win. We tend to put our money on the favorite most of the time. In fact, we bet on the favorite far more frequently than we should. To understand why, you have to understand some of the basic functions and malfunctions of human decision-making.
Filling out a winning March Madness bracket is difficult, but the process itself is simple. All you have to do is pick a winner for each game in your bracket. Most of the time, sports betting is more complicated than that. It’s easy enough to pick the favorite to win, but what if we were to say the favorite has to win by at least eight points? And what if that eight-point spread were carefully crafted to make the game a toss-up — who would you pick then? This is the type of decision sports bettors have to make all the time.
In 2004, University of Chicago economist Steven Levitt identified the fact that point spreads aren’t set like typical market prices, by equating relative levels of supply and demand. Instead, bookmakers set the margin to make the chance of the favorite covering the spread to be roughly 50 percent. Levitt speculated that bookmakers substantially improve their profits by biasing the spread very slightly against the favorite. This approach is profitable for bookmakers in part because, despite facing virtually even odds, people are much more likely to bet on the favorite than the underdog.
The question that Levitt’s research left unaddressed is why people show such a strong bias towards favorites. As digital editor of the Society for Personality and Social Psychology, I come across many studies, and I found a compelling answer to this question in the research of Joseph Simmons, associate professor at the University of Pennsylvania’s Wharton School, and Leif Nelson, associate professor at the Haas School of Business at the University of California, Berkeley. Simmons and Nelson say that people’s confidence in their own intuitions — regardless of whether that confidence is justified — guides their decision-making.
“When people decide how to bet on a game, first they identify who is going to win,” Nelson said. That decision is often fast and easy, particularly when teams are not evenly matched. “The faster and easier it is, the less concerned they are with correcting that intuition when answering the more difficult question of whether the favorite is going to beat the point spread.”
For all but the most experienced bettor, determining whether the favorite will beat the spread is incredibly challenging. Keeping in mind that the spread is carefully calibrated to make the choice a virtual coin flip, people simply don’t have much to go on besides their intuition. And because their intuition strongly suggests that the favorite will win, in the absence of information to the contrary it also tells them that the favorite will beat the spread. In a game between two fairly evenly matched teams, people’s feelings of confidence in the favorite to win are diminished, and they’re much less likely to pick the favorite to cover the spread.
Simmons and Nelson analyzed betting data on 1,008 regular season NFL games on Sportsbook.com from 2009 to 2012. They found the average share of money bet on the favorite was 65 percent. This confirmed their initial study in which they tracked data from thousands of predictions of 850 professional and college football games on Yahoo.com for the 2003 and 2004 seasons. There Simmons and Nelson found, just as Levitt did, that even though favorites were about 50 percent likely to beat the spread (413 favorites beat the spread, 415 did not, and 22 were ties), people bet on the favorite more than two-thirds of the time. In fact, the more people believed a certain team would win, the more likely they were to also choose that team to beat the spread. Put another way, the confidence bettors felt in picking the winner translated into an unrelated belief that the winner would beat the spread.
Simmons and Nelson also ran a series of studies in a controlled laboratory setting. They made sure that people knew exactly what it meant to bet the spread. In addition to asking people who they thought would win the game and how confident they were in their choice, the researchers asked them to estimate the margin of victory. Remarkably, people continued to overwhelmingly bet that the favorite would cover the same spread they had just personally estimated. And, once again, the more confident people felt that a team would win, the more likely they were to bet that the team would beat the spread.
Astute gamblers may have noticed that although the bias towards favorites is a persistent one, it doesn’t appear to cost people very much. If the point spread is calibrated to give favorites a 50 percent chance of beating it, then even if people bet on the favorite every time, they should win half their bets, just as they would if they always bet on the underdog or chose at random. In another paper, however, Simmons and Nelson, along with Jeff Galak of Carnegie Mellon University and Shane Frederick of Yale University, found that favoritism towards favorites persists even when the playing field is tilted in favor of the underdog. People continued to show a bias toward picking favorites to cover the spread even when points were added to the spread dropping the favorites’ odds below 50 percent. Even explicitly telling people that the spread was artificially inflated didn’t stop them from making the costly error.
Luckily, as you scramble to fill out your March Madness bracket, you don’t have to pick against spreads. You just have to pick who will win each game, something your intuition is pretty good at doing. So, in this case, go right ahead: Follow your gut and pick the favorites.