Monday, December 19

Betting on the bad guys

Should sports fans bet against their favourite team?

It's an intriguing question that piqued my interest when I happened upon a working paper by South African economics student Bart Stemmet, titled Hedging one's happiness — Should a sports fan bet on the opponent?

Hardcore sports fans know that it can be painful when your favourite team loses a big game. But what if you could buy insurance against the pain? As Stemmet points out, you can: just bet on the opposition. If the good guys win, you'll lose your bet, but it's a small price to pay for the sweet taste of victory. And if the bad guys win, the money you'll pocket from winning the bet will at least make you feel better.

Stemmet discusses the economics of happiness and develops a theoretical model to demonstrate that, on paper, betting for the opposition is a good idea. But my sense is that although this could work in theory, it doesn't make sense in practice.

Sports is a little bit like religion for die-hard sports fan. You support your team through thick and thin — unquestioning loyalty is key. To bet against the opposition would be a little bit like a Christian reading the Bible but then going to a Buddhist temple to worship, just in case they picked the "wrong" religion. In economics terms, the disutility of disloyalty when it comes to certian situations (such as sports or religion) can be so high as to offset any potential benefits from hedging. I'm not sure I'd be consoled much if I won money by betting on the opposition — it'd feel like dirty money.

Hedging can also take away the fun of surprises. With hedging or insurance, the goal is to smooth out your well-being, regardless of whether something wonderful or something terrible happens. In other words, by betting against the opposition, we smooth out our emotions at the extremes — we will be less ecstatic after a big win, and less depressed after a big loss. But it only makes sense to do this if individuals are risk averse — they don't like uncertainty. And when it comes to sports, I think most fans are risk-loving.

Uncertainty is precisely what makes a sporting event so exciting. It's much less fun to watch a taped match after you know the final score than when you're completely oblivious to the outcome. Betting for the opposition would be counterprodutive, since by taking away some of the uncertainty about how you'll feel about the outcome of a game, you make watching the game less fun.

Stemmet's proposition is intriguing, but this Vancouver Canucks fan won't be betting on the Blackhawks or Bruins any time soon.