West Virginia Researchers Studying Ills of Gambler’s Fallacy, Parlays

With the help of a $300,000 grant from Arnold Ventures, academics at West Virginia University (WVU) are studying the ill effects of the gambler’s fallacy and bettors’ deep embrace of parlays.

Professors at the West Virginia University John Chambers College of Business and Economics are examining, among other topics, what they call loss-chasing. That’s also known as the gambler’s fallacy, which states that when they’re on losing streaks, unwitting bettors often up their respective antes in hopes of recouping losses and potentially turning profits. It’s a fallacy because the line of thinking ignores the point that each new bet is independent of the prior wager.

Brad Humphreys, Chambers College economics professor, notes that parlays often entice Mountaineer State bettors to chase losses.

Following the Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA) in 2018, West Virginia was one of the first states to approve online sports wagering. It legalized iGaming in July 2020.

West Virginia Loves Parlays

Sportsbook operators love parlays, or multi-leg bets, because those wagers are high hold propositions for the companies. Estimates vary, but various studies indicate the percentage of bets placed on platforms such as DraftKings and FanDuel that are parlays range from 54% to 72% in any given year.

West Virginia bettors’ affinity for parlays runs even deeper with the university noting 90% of sports wagers placed in the state are of the combination variety. That may be a sign many bettors there don’t understand the daunting, unfavorable math behind parlays. Nor do they understand why sportsbooks love these bets.

The WVU researchers are aiming to identify some of the triggers behind loss-chasing and parlay enticement in an effort to help problem gamblers get needed help.

Arnold Ventures Committed to Studying Sports Wagering Issues

Founded in 2008 by Laura and John Arnold, Arnold Ventures last month concluded a funding round in which it doled out $2.6 million to 12 research entities to study the effects of legalized sports wagering. Areas of emphasis in those studies will be financial consequences for bettors and households, evaluation of consumer behavior and risk-taking, public health and social outcomes and leveraging the research to better inform policy outcomes.

John Arnold knows something about managing risk on a large scale. He rose to prominence as a natural gas trader at Enron and went on to start his own hedge fund, Centaurus Advisors. He’s regarded as one of the best traders of energy commodities of all-time.