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Framing effects and the market selection hypothesis: Evidence from real‐world isomorphic bets
Author(s) -
Brown Alasdair,
Yang Fuyu
Publication year - 2021
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12519
Subject(s) - framing (construction) , framing effect , economics , financial economics , econometrics , psychology , social psychology , geography , archaeology , persuasion
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.