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Framing effects and the market selection hypothesis: Evidence from real‐world isomorphic bets

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  • Alasdair Brown
  • Fuyu Yang

Abstract

We collect data on 75 million GBP of tennis bets over a 6 year period to analyze whether participants in high‐stakes environments recognize simple framing differences. The structure of this market means that we can place the same bet at the same time in two different ways. These two isomorphic bets are framed differently, and often priced differently. We find that bettors make frequent mistakes, choosing the worse of the two bets in 35% of cases. However, bettors who choose the inferior price earn higher returns from their bets, suggesting that their effort has been focused on fundamental information acquisition rather than bet execution. The net result is that market selection may, if anything, slightly favor those who are unable, or unwilling, to recognize framing differences.

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  • Alasdair Brown & Fuyu Yang, 2021. "Framing effects and the market selection hypothesis: Evidence from real‐world isomorphic bets," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 399-413, July.
    • Handle: RePEc:wly:soecon:v:88:y:2021:i:1:p:399-413
    DOI: 10.1002/soej.12519
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